Legislature(2005 - 2006)

02/08/2006 02:10 PM RES


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02:10:37 PM Start
02:11:20 PM Presentation: the Alaska Mining Association
03:17:19 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
              SENATE RESOURCES STANDING COMMITTEE                                                                             
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                        February 8, 2006                                                                                        
                           2:10 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
SENATE RESOURCES                                                                                                                
                                                                                                                                
 Senator Thomas Wagoner, Chair                                                                                                  
 Senator Ralph Seekins, Vice Chair                                                                                              
                                                                                                                                
HOUSE RESOURCES                                                                                                                 
                                                                                                                                
 Representative Jay Ramras, Co-Chair                                                                                            
 Representative Kurt Olson                                                                                                      
 Representative Harry Crawford                                                                                                  
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
SENATE RESOURCES                                                                                                                
                                                                                                                                
 Senator Ben Stevens                                                                                                            
 Senator Fred Dyson                                                                                                             
 Senator Bert Stedman                                                                                                           
 Senator Kim Elton                                                                                                              
 Senator Albert Kookesh                                                                                                         
                                                                                                                                
HOUSE RESOURCES                                                                                                                 
                                                                                                                                
 Representative Ralph Samuels, Co-Chair                                                                                         
 Representative Jim Elkins                                                                                                      
 Representative Carl Gatto                                                                                                      
 Representative Gabrielle LeDoux                                                                                                
 Representative Paul Seaton                                                                                                     
 Representative Mary Kapsner                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: The Alaska Mining Association                                                                                     
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
STEVE BORELL, Executive Director                                                                                                
Alaska Miners Association                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified on  behalf of mining  companies in                                                               
Alaska.                                                                                                                         
                                                                                                                                
JIM CALVIN, Economic Analyst                                                                                                    
McDowell Group                                                                                                                  
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:  Presented  economic  study  funded  by  the                                                               
Alaska Miners Association.                                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR THOMAS WAGONER  called the joint meeting of  the Senate and                                                             
House  Resources  Standing Committees  to  order  at 2:10:37  PM.                                                             
Senator Wagoner  and Representatives  Olson, Ramras  and Crawford                                                               
were  present at  the call  to  order.   Senator Seekins  arrived                                                               
while the meeting was in progress.                                                                                              
                                                                                                                                
^PRESENTATION: The Alaska Mining Association                                                                                  
                                                                                                                                
CHAIR  WAGONER announced  that  the committee  would  now hear  a                                                               
presentation from the Alaska Mining Association.                                                                                
                                                                                                                                
2:11:20 PM                                                                                                                    
                                                                                                                                
STEVE  BORELL,  Executive  Director, Alaska  Miners  Association,                                                               
said the  mining industry  is at  a unique  time in  history with                                                               
precious and base  metal prices being at their  highest in recent                                                               
history.   He said  that in 2006  exploration will  be extensive.                                                               
He  said the  Alaska  State Legislature  has  created a  positive                                                               
climate  for resource  development in  Alaska, and  "we are  very                                                               
appreciative of that."   He said he will speak  about current and                                                               
future mines  in Alaska.   He said the Alaska  Miners Association                                                               
has  contracted  with  the  McDowell  Group  to  do  an  economic                                                               
analysis.  Several mine  representatives introduced themselves in                                                               
the audience.                                                                                                                   
                                                                                                                                
2:15:00 PM                                                                                                                    
                                                                                                                                
MR. BORELL referred  to the Usibelli Coal Mine  and said Alaska's                                                               
coal  has a  low sulfur  content,  and that  emissions from  coal                                                               
plants nationwide  are declining in spite  of increased activity.                                                               
He said the demographics of the  people who work at the mine site                                                               
are  extremely interesting.   He  noted  that 27  percent of  the                                                               
employees of  the Usibelli coal  mine are either second  or third                                                               
generation coal miners.  Mr.  Borell said the company produces 95                                                               
jobs and  contributes to other  industry jobs, like  railroad and                                                               
power plant jobs.  He added  that safety is Usibelli's number one                                                               
priority.                                                                                                                       
                                                                                                                                
2:17:00 PM                                                                                                                    
                                                                                                                                
MR. BORELL  said that the  Kennecott Greens Creek  Mining Company                                                               
is a  joint venture, and  it is  the largest private  employer in                                                               
Southeast  Alaska.    He  said  the mine  has  several  years  of                                                               
reserve, but  it is spending  about $4.2 million  in exploration.                                                               
He said  the mine was  certified in the  Environmental Management                                                               
System, which is difficult to attain.                                                                                           
                                                                                                                                
2:19:12 PM                                                                                                                    
                                                                                                                                
MR. BORELL  pointed out that  NANA Regional Corporation  owns the                                                               
Red Dog Mine and Teck Cominco is  the operator.  The Red Dog Mine                                                               
is the largest zinc concentrate producer  in the world.  He noted                                                               
that 30  years of reserve remain  at the project site,  and 50 to                                                               
60  percent of  employees are  NANA  shareholders.   He showed  a                                                               
picture of  a lightering vessel.   NANA also  receives royalties,                                                               
he added.                                                                                                                       
                                                                                                                                
2:21:15 PM                                                                                                                    
                                                                                                                                
MR. BORELL said the Fort Knox  Mine in Fairbanks employs over 440                                                               
people.   He noted that the  safety record is good;  the mine has                                                               
worked over 1 million worker  hours without a lost-time accident.                                                               
He  said  the  mine's  reservoir  has  a  healthy  population  of                                                               
grayling and  burbot, and when the  mine is done, the  state will                                                               
own the lake and fishing will be allowed.                                                                                       
                                                                                                                                
2:23:12 PM                                                                                                                    
                                                                                                                                
MR. BORELL informed  the committees that the  construction of the                                                               
Pogo Mine is  almost complete, with the first  gold pour expected                                                               
within a few  days.  He showed a picture  of the first production                                                               
stope.   He said the  mill is state-of-the-art and  the permanent                                                               
workforce is expected to be 238  at full production.  He said all                                                               
of the  people being hired  from Alaska have already  been found.                                                               
There is a worldwide shortage  of experienced underground miners,                                                               
he noted.                                                                                                                       
                                                                                                                                
2:26:05 PM                                                                                                                    
                                                                                                                                
MR.  BORELL said  that the  Kensington Gold  Mine is  expected to                                                               
begin in 2007,  producing 100,000 ounces of gold per  year for at                                                               
least 10 years.   The annual payroll, including  benefits will be                                                               
$16 million.   He said there is a mine  training course occurring                                                               
now,  with  25  attendees.    He said  15  of  the  trainees  are                                                               
shareholders  of Goldbelt,  Kake, or  Klukwan.   The mine  is not                                                               
visible from Berner's  Bay, he stated.  The  company has received                                                               
many  environmental  awards,  and  its motto  is  "producing  and                                                               
protection," he noted.                                                                                                          
                                                                                                                                
2:28:06 PM                                                                                                                    
                                                                                                                                
MR.  BORELL related  that  the Nixon  Forks  Mining Project  near                                                               
McGrath shut  down because of low  metal prices.  He  said trucks                                                               
will go underground to get the  ore, and operations will begin in                                                               
the summer  of 2006 with 58  full-time jobs.  He  stated that the                                                               
company has  a reclamation bond  in place  of $3.5 million.   The                                                               
mine life is  two to three years  and it does not  lend itself to                                                               
developing a  large reserve.   There is  a significant  amount of                                                               
gold that is  still in the tailings that will  be reprocessed, he                                                               
noted.                                                                                                                          
                                                                                                                                
2:30:08 PM                                                                                                                    
                                                                                                                                
MR.  BORELL informed  the committees  the Rock  Creek Project  in                                                               
Nome is  a conventional open  pit mine that has  been extensively                                                               
mined.  There  will be production at two sites,  he said, and one                                                               
of those  is eight  miles from Nome.   He said  it has  the first                                                               
road in  the roads-to-resources program, which  made possible the                                                               
ability to bring  ore from Big Hurrah.  There  will be 7,000 tons                                                               
milled per day with  a mine life of four to five  years.  He said                                                               
the power will  be provided by Nome Utilities.   He said the mine                                                               
has already purchased equipment, and  there will be 135 new jobs,                                                               
which is an  unheard of opportunity in that area.   He said there                                                               
will not be a camp, so workers will have to drive to work.                                                                      
                                                                                                                                
2:33:26 PM                                                                                                                    
                                                                                                                                
MR. BORELL  explained that the  Chulitna Coal Project  is located                                                               
on the Kenai  Peninsula, west of Anchorage, Alaska.   He said two                                                               
individuals have been  investing in it since 1978,  and he showed                                                               
a  map of  its  location.   He  explained that  there  will be  a                                                               
conveyer belt  to carry the coal  down, and there will  be a road                                                               
along side  it, but  it is unknown  which one will  be used.   He                                                               
said it  is over  a mile into  Cook Inlet to  get to  deep water.                                                               
There is  a 300 million  ton mine-able deposit in  logical mining                                                               
unit one  and there is a  possible additional area.   He said the                                                               
total investment  is projected  to be $350  to $400  million, the                                                               
earliest  start date  is  2007  and it  will  employ 350  people.                                                               
Vessels will have  a 60-foot draft to make it  economical to haul                                                               
coal, he added.                                                                                                                 
                                                                                                                                
2:35:51 PM                                                                                                                    
                                                                                                                                
MR. BORELL turned  to the Donlin Creek Project,  which is located                                                               
on Calista  Native Corporation land  and run by Placer  Dome that                                                               
was recently  taken over by  Barrick Gold.  The  combined company                                                               
will have 26  mines worldwide.  He said the  2006 field season is                                                               
moving forward rapidly, but in  2005 111 Kuskokwim area residents                                                               
worked at  the mine  site.   He noted that  the mine  has ongoing                                                               
wind  power studies.   He  related that  the company  is doing  a                                                               
feasibility  study,  and  there  will  be  twice  the  amount  of                                                               
drilling in 2006 as in 2005.                                                                                                    
                                                                                                                                
2:38:08 PM                                                                                                                    
                                                                                                                                
MR. BORELL  showed "an extremely  important slide"  showing local                                                               
shareholders  as  supervisors  who   work  at  the  Donlin  Creek                                                               
Project,  including  a  geologist,   equipment  operator,  and  a                                                               
warehouseman.                                                                                                                   
                                                                                                                                
2:39:03 PM                                                                                                                    
                                                                                                                                
MR.  BORELL then  informed the  committees that  Northern Dynasty                                                               
Minerals Ltd. (NDM)has  placed its permitting on hold  for a year                                                               
in order to bring in larger  drills to the Pebble Mine because it                                                               
has discovered significant  findings to the east  of the deposit.                                                               
New drills can go  down 6,000 feet, he noted.   He said they need                                                               
to  understand the  eastern zone,  and there  will be  additional                                                               
training for  bear guards and drill  helpers.  He said  there are                                                               
scholarship programs that were donated  by Northern Dynasty.  "We                                                               
need mining engineers like never before," he stated.                                                                            
                                                                                                                                
MR. BORELL said the Alaska  Native Science Engineering Program, a                                                               
program with  which NDM worked,  just received a  national award.                                                               
The company  will hire many Alaskans,  he opined.  In  2005 there                                                               
were 609 employees of which 75 percent were Alaskans.                                                                           
                                                                                                                                
2:42:26 PM                                                                                                                    
                                                                                                                                
MR. BORELL  distributed a report  by the McDowell Group  hired by                                                               
the Alaska Miners  Association to review the  economic impacts of                                                               
Alaska's mining industry.                                                                                                       
                                                                                                                                
2:43:38 PM                                                                                                                    
                                                                                                                                
JIM CALVIN, Economic Analyst, McDowell  Group, explained that the                                                               
McDowell  Group is  a research  and consulting  business that  is                                                               
well known in the visitor  and commercial fishing industries.  He                                                               
said the  company has  a broad  perspective on  Alaska's economy,                                                               
but this  is the company's  first effort at looking  at statewide                                                               
economic impacts.                                                                                                               
                                                                                                                                
2:45:52 PM                                                                                                                    
                                                                                                                                
MR. CALVIN said  the report considered the mining  industry to be                                                               
composed  of many  activities, including  big  mines; dozens  and                                                               
dozens   of   small-scale    and   medium-scale   placer   mining                                                               
operations;"   and  small   sand,  rock   and  gravel   quarrying                                                               
activities in nearly  every community in the state.   He said the                                                               
research focused  on 2004  when mining  companies spent  over $70                                                               
million on  exploration projects  in Alaska  and $200  million on                                                               
mine  development.   The economic  impact was  2,900 annual  jobs                                                               
with a payroll of $194 million.                                                                                                 
                                                                                                                                
2:48:11 PM                                                                                                                    
                                                                                                                                
MR. CALVIN highlighted that there  are over 5,100 jobs associated                                                               
with the  industry.  However, it's  not on the same  scale of oil                                                               
and gas,  fishing, tourism, or  state government in terms  of its                                                               
overall economic  impact to the state,  he added.  He  said it is                                                               
more interesting  to look  at the local  impacts.   For instance,                                                               
the average annual salary is  $70,000 for Alaska workers in metal                                                               
mines, and they  are year round jobs.  Over  80 percent of people                                                               
employed in  mining are Alaska  residents.  He added  that during                                                               
the  construction  phase of  the  Pogo  Mine the  employees  were                                                               
mostly  Alaska residents.   Many  mining industry  jobs occur  in                                                               
rural   Alaska  where   there  are   very   few  private   sector                                                               
opportunities.                                                                                                                  
                                                                                                                                
2:50:43 PM                                                                                                                    
                                                                                                                                
MR. CALVIN said mining jobs have  become an important part in the                                                               
economy  in certain  boroughs, especially  the Red  Dog and  Fort                                                               
Knox  Mines.   In  fact, the  Greens Creek  Mine  is the  largest                                                               
private sector employer  in Juneau and it's a  critical source of                                                               
private sector  jobs.   The mining  industry is  a key  source of                                                               
income for  governments around Alaska,  he noted.  He  said three                                                               
quarters the borough's  total general fund came from  the Red Dog                                                               
Mine  last  year.   Fort  Knox  is  the second  largest  property                                                               
taxpayer in  the Fairbanks North  Star Borough.  He  listed other                                                               
mines   that  were   important  sources   of  revenue   to  local                                                               
governments.                                                                                                                    
                                                                                                                                
2:53:26 PM                                                                                                                    
                                                                                                                                
MR.  CALVIN  informed the  committees  that  the mining  industry                                                               
generated $16 million  in state government receipts  in 2004 from                                                               
mining license taxes  and various rents and royalties.   He noted                                                               
that  these figures  are from  2004 when  metal prices  were just                                                               
beginning to  recover, so he  said he  expects the figures  to be                                                               
higher in following  years.  He spoke  of infrastructure benefits                                                               
of the mining industry, including  the Alaska Railroad.  He noted                                                               
that  electric  power rates  are  lower  for Fairbanks  residents                                                               
because of the use of power by mining.                                                                                          
                                                                                                                                
2:55:44 PM                                                                                                                    
                                                                                                                                
MR.  CALVIN  related  that  a   power  line  extension  was  just                                                               
completed to  Greens Creek and that  line can be used  to provide                                                               
power to Hoonah.  He  added that mining provides opportunities to                                                               
Alaska  Natives, including  the  NANA Regional  Corporation.   He                                                               
said  the Red  Dog Mine  has paid  about $100  million since  the                                                               
1980s and it has employed 1,000 different NANA shareholders.                                                                    
                                                                                                                                
2:57:52 PM                                                                                                                    
                                                                                                                                
MR. CALVIN pointed out that  there are important linkages between                                                               
the  mining industry  and Native  interest in  terms of  business                                                               
relationships and opportunities.   In fact, 120 of the  480 or so                                                               
Red Dog Mine employees are  actually employees of subsidiaries of                                                               
NANA  Regional   Corporation.     Similarly,  Placer   Dome,  the                                                               
developer  of   the  Donlin  Creek  project,   has  entered  into                                                               
exploration  and   mining  lease  agreements  with   Calista  and                                                               
Kuskokwin  Corporations.   Therefore, he  opined that  the mining                                                               
industry is  doing very good  things for the Native  interests in                                                               
Alaska.  In  closing, Mr. Calvin reminded the  committee that the                                                               
mining industry provides high paying  jobs, year round jobs, jobs                                                               
for  rural   residents,  and  training  opportunities   that  are                                                               
transferrable   throughout  the   state  and   other  industries.                                                               
Furthermore,  the   mining  industry   is  a   capital  intensive                                                               
business,   which  means   that  local   governments  can   enjoy                                                               
significant benefits  from property tax  revenues.  In  fact, the                                                               
property tax  and sales  tax revenues  generated from  the mining                                                               
industry  and  its  employees far  exceed  any  local  government                                                               
expenditure  on   services  to  the  mine   or  the  mine-related                                                               
population.   Furthermore,  the mining  industry helps  build and                                                               
support   infrastructure  that   benefits   present  and   future                                                               
Alaskans.  Mr. Calvin opined  that the mining industry provides a                                                               
nearly ideal  package of economic  benefits and it's  an industry                                                               
that the state can nurture because it has room to grow.                                                                         
                                                                                                                                
3:03:21 PM                                                                                                                    
                                                                                                                                
CHAIR WAGONER relayed that he is  very happy to see the condensed                                                               
version  of the  McDowell Group  research.   He  said people  are                                                               
interested in this issue.                                                                                                       
                                                                                                                                
SENATOR SEEKINS  expressed interest  in the political  process of                                                               
the  opposition  to the  Pebble  Mine,  and  he asked  about  the                                                               
environmental challenges and how they are being addressed.                                                                      
                                                                                                                                
MR. BORELL said  he looks critically at companies  that come into                                                               
Alaska because  he does not  want them to make  a mess.   He said                                                               
NDM  picked the  best individuals  to do  environmental analyses.                                                               
He said  the area  was selected  by the State  of Alaska  for its                                                               
mineral values  long before  minerals were ever  found.   He said                                                               
NDM raised  significant amounts  of money to  drill in  the area.                                                               
If the  project becomes a  mine, the  following would occur:   an                                                               
additional year of  drilling, reevaluation of the  mine plan, and                                                               
a three-year environmental impact  statement process with all the                                                               
state and  federal agencies.   If, after the  aforementioned, the                                                               
mine is  permittable, the  mine will have  1,000 jobs  for 50-100                                                               
years in  a place where there  are few jobs.   The aforementioned                                                               
is a huge potential benefit to the local communities, he opined.                                                                
                                                                                                                                
3:09:54 PM                                                                                                                    
                                                                                                                                
SENATOR  SEEKINS  opined  that  the permitting  process  is  very                                                               
cautious in evaluating  risks, and he asked if there  is value in                                                               
having  the legislature  perform a  review to  ensure that  these                                                               
agencies are  adequately protecting  the interests of  the people                                                               
of Alaska.  He further asked  if the [state agencies] are staffed                                                               
well  enough   to  do   the  aforementioned   without  additional                                                               
legislative oversight.                                                                                                          
                                                                                                                                
MR.  BORELL replied  yes,  adding that  the  state agencies  have                                                               
extremely  competent people.   In  fact, many  of them  have just                                                               
gone  through the  permitting  process  for the  Pogo  Mine.   He                                                               
suggested  that the  legislature has  appropriately defined  land                                                               
planning for the state.  He  explained that the land plans aren't                                                               
based on a  project; the environmental impact  statement (EIS) is                                                               
the  project permit  approach.   The overall  intent of  the land                                                               
plan is  to establish the ground  rules upon which a  company can                                                               
make  long-term decisions.   Mr.  Borell opined  that extreme  is                                                               
uncertainty  created  when   the  state  comes  back   in  to  do                                                               
additional land  planning once  a company has  a project  that it                                                               
wants to  move forward  for permitting.   Furthermore,  there has                                                               
been  much  discussion  [and effort]  to  streamline  permitting.                                                               
Adding an additional planning process  in the middle of a project                                                               
isn't appropriate [in streamlining].   Mr. Borell opined that the                                                               
current system works well.                                                                                                      
                                                                                                                                
SENATOR  SEEKINS suggested  that sometimes  simple opposition  to                                                               
and desire  to kill a project  is expressed as the  need to study                                                               
it  and  obtain  more  information on  it.    Therefore,  Senator                                                               
Seekins  expressed   concern  that   if  there   aren't  adequate                                                               
mechanisms  and staff  in place,  then that  should be  addressed                                                               
rather than studying a project to death.                                                                                        
                                                                                                                                
3:14:18 PM                                                                                                                    
                                                                                                                                
CHAIR WAGONER pointed out that  the federal government is working                                                               
on new  mine safety  regulations, and inquired  as to  the impact                                                               
that will have on future Alaska mining.                                                                                         
                                                                                                                                
MR. BORELL said that he has had  a glimpse of a few of the things                                                               
being done  by the federal  government.  Although there  are some                                                               
things that  can be improved  upon, he related  his understanding                                                               
that  the  global  positioning satellite  technology  that  could                                                               
provide knowledge  as to  the location  of people  doesn't exist.                                                               
Mr. Borell acknowledged that any  fatalities are too many, but he                                                               
also pointed out that the mining  industry is far safer than most                                                               
other  industries,  including  the  construction  industry.    He                                                               
opined that the current laws  now are extremely stringent and the                                                               
inspectors  who   review  the  mine  sights   already  have  much                                                               
authority.                                                                                                                      
                                                                                                                                
3:17:07 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business  before the committees, the joint                                                               
meeting  of the  House and  Senate Resources  Standing Committees                                                               
was adjourned at 3:17:19 PM.                                                                                                  

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