Legislature(2017 - 2018)SENATE FINANCE 532
02/13/2018 12:00 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Overview(s): Update on Alaska's Mining Industry | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE RESOURCES STANDING COMMITTEE
SENATE RESOURCES STANDING COMMITTEE
February 13, 2018
12:01 p.m.
MEMBERS PRESENT
HOUSE RESOURCES STANDING COMMITTEE
Representative Andy Josephson, Co-Chair
Representative Geran Tarr, Co-Chair
Representative John Lincoln
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 Bert Stedman
Senator Kevin Meyer
Senator Bill Wielechowski
Senator Click Bishop
MEMBERS ABSENT
HOUSE RESOURCES STANDING COMMITTEE
Representative Harriet Drummond
Representative Mike Chenault (alternate)
Representative Chris Tuck (alternate)
SENATE RESOURCES STANDING COMMITTEE
All members present
OTHER LEGISLATORS PRESENT
Senator Peter Micciche
COMMITTEE CALENDAR
OVERVIEW(S): UPDATE ON ALASKA'S MINING INDUSTRY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DEANTHA CROCKETT, Executive Director
Alaska Miners Association
Anchorage, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation
entitled, "Mining Industry Update," dated 2/13/18.
KAREN MATTHIAS, Executive Director
Council of Alaska Producers
Anchorage, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation
entitled, "Mining Industry Update," dated 2/13/18.
ELIZABETH CRAVALHO, Vice President
External and Government Affairs
NANA Regional Corporation, Inc.
Kotzebue, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation
entitled, "Mining Industry Update," dated 2/13/18.
MICHAEL SATRE, Manager
Government and Community Relations
Hecla Greens Creek Mine
Juneau, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation
entitled, "Mining Industry Update," dated 2/13/18.
ACTION NARRATIVE
12:01:00 PM
CHAIR CATHY GIESSEL called the joint meeting of the House and
Senate Resources Standing Committees to order at 12:01 p.m.
Present at the call to order from the House Resources Standing
Committee were Representatives Tarr, Johnson, Parish, Talerico,
and Lincoln. Representatives Birch, Rauscher, and Josephson
arrived as the meeting was in progress. Present at the call to
order from the Senate Resources Standing Committee were Senators
Giessel, Bishop, Coghill, von Imhof, Stedman, Meyer, and
Wielechowski. Also present was Senator Micciche.
^OVERVIEW(S): UPDATE ON ALASKA'S MINING INDUSTRY
OVERVIEW(S): UPDATE ON ALASKA'S MINING INDUSTRY
12:03:00 PM
CHAIR GIESSEL announced that the only order of business would be
the annual update on the state of mining in Alaska.
12:03:22 PM
DEANTHA CROCKETT, Executive Director, Alaska Miners Association,
introduced a PowerPoint presentation entitled, "Mining Industry
Update," dated 2/13/18. She said Karen Matthias would begin the
portion of the presentation on the benefits of mining.
12:05:19 PM
KAREN MATTHIAS, Executive Director, Council of Alaska Producers
(CAP), informed the committee CAP is a statewide trade
association of large producing metal mines and advanced mining
projects. She reported in 2016 metal prices began to improve,
which led to improved economics for the mining industry in 2017.
In 2017, mining companies directly employed 4,400 people and
supported thousands of indirect jobs through companies that
provide services to mines, including transportation,
engineering, and environmental management. Ms. Matthias said
most of the mining jobs are year-around and pay an average
salary of $108,000 per year. She pointed out mining has a
positive regional impact to residents of over 55 communities and
over 600 businesses, many of which are in rural areas (slide 2).
Slide 3 listed the benefits of mining to Alaska Native
corporations; for example, the Donlin Gold project employed over
90 percent local hire during its exploration phase, and the
Upper Kobuk Minerals Project employs 59 percent local hire.
Further, Donlin Gold anticipates building a natural gas pipeline
to Western Alaska that would provide access to a clean and
affordable energy source to village residents. Ms. Matthias
advised mining also provided $34 million in revenue to local
governments in 2017, including the City and Borough of Juneau,
the Fairbanks North Star Borough, and the Northwest Arctic
Borough, $61 million to state government, and $49 million in
other state government-related revenue (slide 4). Turning to
the Alaska Permanent Fund, she advised a percentage of mining
royalties for mines operating on state land is deposited into
the fund, and the fund invests in mining companies (slide 5).
Slide 6 illustrated an average of state revenue from mining -
over a five-year period - versus the average costs to the state
of managing and overseeing the mining industry through
regulation and permitting. Slide 7 illustrated how mining pays
its way through spending to develop the infrastructure needed
for exploration, development, and construction, which often
includes access to remote areas. To reach production, a modern
mine may cost over hundreds of millions to build; in fact, Red
Dog and Kensington Mines built facilities to supply their own
power, and Greens Creek and Kensington mines built marine
facilities. She pointed out mines in the Lower 48 have better
access to roads, railroads, and existing electrical grids;
however, in Alaska, mines must build infrastructure and comply
with regulatory timelines. One of the reasons the state's costs
to manage and permit the mining industry are low is the state's
management costs are billed to the companies through
reimbursable service agreements. The state also requires
financial assurance for reclamation and closure costs.
12:13:29 PM
MS. MATTHIAS continued to slide 8 and acknowledged the state
encourages infrastructure and investment through the Alaska
Industrial Development and Export Authority (AIDEA), Department
of Commerce, Community & Economic Development (DCCED), which was
formed to stimulate economic growth and invest in projects that
pay an acceptable rate of return. [AIDEA's] investment in the
Delong Mountain Transportation System in support of the Red Dog
Mine was an original investment of $265 million and the return
to date is $465 million, at 6.5 percent annual interest (slide
8). Ms. Matthias advised mining is needed for every aspect of
daily living; although recycling is important, it does not meet
the demand for minerals in the modern world, thus mining is
necessary and must be done safely. She said mines in Alaska are
world-class in terms of safety and environmental responsibility
(slide 9). Silver and gold are found in electronics and in
automobile airbags (slide 10). Furthermore, minerals and metals
are essential for renewable technologies such as batteries,
solar panels, wind turbines, and hybrid vehicles (slide 11).
12:16:45 PM
ELIZABETH CRAVALHO, Vice President, External and Government
Affairs, NANA Regional Corporation, Inc. (NANA), began the
portion of the presentation on the Red Dog Mine. Ms. Cravalho
informed the committee she is a NANA shareholder and resides in
Kotzebue. NANA is the Alaska Native regional corporation
located in Northwest Alaska and its region includes 11 villages.
NANA has over 14,000 shareholders, the majority of whom live in
Alaska, and employs approximately 15,000 people globally with 10
percent shareholder employment. Red Dog Mine is the largest
lead and zinc mine in the world and NANA owns the orebody which
is located on Alaska Native Claims Settlement Act (ANCSA) land
(slide 13). The mine was created by NANA and [Teck Resources
mining company] in 1982 and is the largest taxpayer in the
Northwest Arctic Borough. The mine is connected to a port on
the coast by the Delong Mountain Transportation System road
owned by AIDEA. She described the agreements prior to the
development of the mine and characterized the mine as an
opportunity to responsibly develop resources in the region and
provide economic development. Further, the mine has a
significant economic impact on the region: 610 annual average
jobs; average annual wage of $112,000; cumulated wages paid to
NANA shareholders were $303 million between 1999 and 2013; $100
million paid to state and federal taxes; cumulative wages paid
to Northwest Arctic Borough residents were $132 million;
shareholder hire of 55 percent (slide 14).
12:19:55 PM
MS. CRAVALHO turned to benefits provided by the Red Dog Mine to
the entire state and the nation. Red Dog Mine accounts for over
70 percent of the zinc produced in the U.S., which is necessary
for automobiles and construction. The mine has provided $155.6
million to the Northwest Arctic Borough in payment in lieu of
taxes (PILT), and two recent agreements between the Northwest
Arctic Borough and Red Dog Mine will continue PILT payments; in
addition, Teck will contribute $4-$8 million annually to the
village improvement fund for community projects. She explained
[ANCSA Section 7(i)] requires NANA to share a portion of its
profits earned from the mine and since mining began, NANA has
shared over $820 million with all other Alaska Native
corporations around the state (slide 15).
12:21:46 PM
MICHAEL SATRE, Manager, Government and Community Relations,
Hecla Greens Creek Mine, began the portion of the presentation
on the Hecla Greens Creek Mine, located 18 miles south of
Juneau. Mr. Satre informed the committees the governor wishes
to double the number of mines in Alaska, and to understand how
to do so, he described the measures necessary to advance the
Greens Creek Mine to production. Exploration for the mine began
in 1973 and the discovery of the deposit occurred in 1975. The
mine is located within the Admiralty Island National Monument,
established in 1978, and provisions of the Alaska National
Interest Lands Conservation Act (ANILCA) allow Hecla to lease
monument lands to support mining activities. Permitting and
construction continued from 1980-1989 and operation began in
1989, with continuous operation since 1996. He explained value
creation is the point in a mine's production cycle at which
there is a net positive cash flow; from 1987 to 2006, the mine
had a net negative cash flow after accounting for all the
operating, capital, and lease expenses (slide 17). Mr. Satre
stressed the need for time, dedication, persistence, and
patience to find, permit, and open a mine, and to realize
profits (slide 18). After 2006, metal prices rose, the mine
found efficiencies, and production was increased. The mine is
100 percent owned by Hecla, a 126-year-old mining company based
in Idaho (slide 19). Mr. Satre cautioned four of the five major
metal mines in Alaska are approaching the end of mine life, but
mining companies invest millions of dollars in further
exploration and infrastructure to convert resources to reserves
or a mine plan. For example, Fort Knox Gold Mine has acquired
additional adjacent land, Pogo Mine is exploring underground,
and Kensington Gold Mine seeks to expand mine life. However,
lower metal prices or changes in permitting may affect new
operations.
12:27:28 PM
SENATOR MICCICHE asked whether the amounts shown on [slides 18
and 19] are nominal or real dollars.
MR. SATRE said nominal. Using Greens Creek as an example, slide
21 illustrated the estimated exploration, permitting, and
construction time needed to bring a mine into production, as
opposed to the mine life of five existing mines. He pointed out
the possibility of a production gap in Alaska, although two very
large projects are in the permitting stage, and other projects
are in advanced exploration stage. He acknowledged the
governor's challenge of doubling the number of mines in Alaska
is difficult to meet. He agreed with earlier testimony that
advanced exploration projects in Alaska, if on a road system in
the Lower 48, would already be developed. In Alaska, a mining
prospect must be world class in grade or size - or have access
and electrical power to advance to production - otherwise the
cost of development and operation are too high. Slide 22
indicated what is needed to advance a mine to production:
grade, size, access, and power. For example, Red Dog and Pogo
have large deposits, Greens Creek has marine access and power,
Fort Knox has power, and Kensington has access. In addition,
community support is needed, which often comes after the mine is
constructed. Also needed are partners, such as landowners and
mineral rights owners, a stable fiscal climate, and a stable
regulatory regime. He stressed the importance of a stable
fiscal climate to ensure investment, noting the mining industry
should not be taxed to relieve the state's fiscal crisis.
Furthermore, the permitting system in Alaska is rigorous and
science-based and should remain so (slide 23). Slide 24
illustrated Mr. Satre's personal view on the status of mines in
operation today: existing mines are doing well and continue to
invest and extend their mine life; investment is difficult to
obtain for exploration but is increasing; Alaska remains an
infrastructure-poor state; there is good community support for
mining - although some projects are controversial - due to
mining's great record; Alaska Native land attracts investment;
state land does not attract investment; federal land uncertain
for investment; ANCSA land offers the best opportunities; state
permitting regime is uncertain; fiscal climate affects staffing
of resource agencies.
12:36:13 PM
MS. CROCKETT began the portion of the presentation on the
environmental regulatory regime under which mines operate. She
advised the legislature, and the public, address topics related
to the impacts from mining that are suggested by proposed policy
and advocacy that questions whether mines are adequately
regulated, and the environment protected. She said the mining
industry believes Alaska has a world class regulatory system as
follows: rigorous permitting for the protection of air, land,
water, fish, and wildlife; strict operational oversight during
the life of the mine; continued oversight after mine closure and
reclamation work to restore the site; financial assurance to
cover state cost if necessary (slide 26). Slide 27 was a list
of some of the permits required to mine in Alaska. She advised
the planning and environmental study, review, testing, and
approval process to permit a large mine takes many years and is
reviewed by dozens of state and federal agencies. Permits
listed on slide 27 are required to permit a large mine on state
or privately-held land, and a mine on federal land requires
additional permitting. In addition, agencies can add provisions
to a permit that are outside the governing laws. Ms. Crockett
reminded the committees the permitting process does not
guarantee approval, because every mine is different, and there
are multiple opportunities for public participation. Alaska's
water monitoring system has three parts: standard water quality
monitoring; biomonitoring of algae and sediment and the metals
uptake, habitat, and population of fish; third-party compliance
audits of company methodology and results, and of the regulatory
agency oversight (slide 28). Further, Alaska law requires an
approved mine plan for reclamation and closure, and an approved
plan of financial assurance, before mine operations begin.
Financial assurance is required of all mines and the guaranties
are reviewed every five years, or less, by third-party reviewers
looking at the company, the mine plan, and the agencies
providing oversight. Ms. Crockett restated agencies can
prescribe additional stipulations related to a permit; in some
cases, mines exceed permit requirements, and she provided an
example of a restoration project completed by Fort Knox Mine and
the Alaska Department of Fish & Game (slide 30). She reviewed
the presentation and questioned whether the right policies are
in place to encourage expansion of the mining industry (slide
31). She expressed hope the committees and the industry share
the following goals: attract mining investment to Alaska; bring
more mines into production, particularly those on state land to
grow mining revenue; keep the state competitive with other
mining jurisdictions; keep the permitting process rigorous and
find efficiencies; preserve stable and predictable tax policies
at state and local levels; ensure responsible financial
management of the state (slide 32).
12:43:35 PM
REPRESENTATIVE PARISH asked for the percentage of mine employees
who are residents.
MS. MATTHIAS said the Department of Labor & Workforce
Development (DLWD) reported for 2016, the nonresident workforce
for mining was 36 percent, for the oil and gas industry it was
37 percent, and for seafood processing it was 75 percent. She
pointed out DLWD statistics are based on permanent fund dividend
applications to determine residency and thus "lag a year ...
[and] fail to capture some of the self-employed and contractors
...." Also, at the Fort Knox Mine in Fairbanks, because the
location of the mine is a 45-minute drive, 100 percent of
employees live in the Fairbanks North Star Borough; in the case
of isolated camps and remote locations, however, the resident
percentage is lower. She observed mining companies encourage
Alaskans to apply for jobs because it is an advantage to the
company to employ Alaskans. In fact, companies invest in
workforce development and educational programs to raise
awareness of jobs in the mining industry
CHAIR GIESSEL asked Ms. Cravalho for NANA's perspective on
Alaska resident hire and shareholder hire at Red Dog Mine.
MS. CRAVALHO said Red Dog Mine has 78 percent Alaska hire at the
mine site, including contractors, and at NANA, shareholder hire
is 55 percent. She related the NANA construction service
facility at Big Lake currently has 100 employees working on an
expansion at Red Dog Mine.
REPRESENTATIVE PARISH inquired as to the most effective means to
encourage Alaskans to work in the mining industry.
12:48:40 PM
MS. MATTHIAS pointed out the resident hire percentages reflect
the mining industry as a whole - not just the five large mines -
and include exploration jobs, which may be seasonal.
Furthermore, community infrastructure - such as affordable
housing, which is a problem in Juneau - plays a role in resident
hire. Also, certain jobs are highly specific; for example,
teams of underground drillers may move around and work for
limited periods of time at certain locations, in a manner
similar to a seasonal career. A way to encourage resident
workers is through the tax credit for education program, which
is an incentive for companies to provide funding directly to the
University of Alaska, school districts, and to vocational and
technical schools, but the program is due to sunset and
legislation is needed to extend the deadline. In fact, through
the education tax credit program between 2011 and 2017, $19
million has been contributed by the mining industry for geology
and mine engineering courses, the Pathways to Mining Careers
program, and the Alaska Vocational Technical Center (AVTEC).
CO-CHAIR JOSEPHSON asked for the definition of an advanced
exploration project.
MR. SATRE explained in mining the first stage is grass roots
exploration with geologists in the field; the next step may be
geophysics or a few drill holes. Advanced exploration is the
point at which a company has publicly declared a resource and
may be ready to begin baseline environmental studies before
applying for a permit.
REPRESENTATIVE PARISH questioned whether exit surveys are taken
for employees that leave employment at Greens Creek Mine.
MR. SATRE said yes; however, the information is confidential.
He related in Juneau departing employees commonly report: no
road, it rains a lot, housing is too expensive.
12:55:23 PM
MS. CRAVALHO added the Northwest Arctic Borough is about 87
percent Alaska Native and American Indian residents; when a
shareholder has a job at the mine and leaves the region, it may
be due to the high cost of living in rural Alaska.
CHAIR GIESSEL noted Representatives Birch, Talerico, and
Lincoln, and Senator Bishop are all active in some aspect of
mining.
SENATOR MICCICHE, speaking as a commercial fisherman, observed
fishing groups do not perceive the state's permitting process as
a [negative] impact on salmon. He asked how to inform "the two
sides together to realize we have a robust permitting system
that has resulted in the most sustainable fisheries on the
planet and ... [get] to some solutions without dramatically
impacting the lives of every business and Alaskan adversely."
MS. CROCKETT opined the first step is to listen to the mining
industry on topics related to regulating the industry, and the
next step would be to talk to the permitting agencies that are
the experts. She remarked:
I have yet to hear an agency representative or anybody
that has a scientific background, that regulates our
industry, say that fish are not adequately protected
from industrial development in the State of Alaska
....
SENATOR BISHOP asked whether the benefits of industry, such as
jobs and payroll, are directly tied to the big mines in the
state.
MS. CROCKETT said no. The benefits presented represent the
entire industry, including placer miners and contractors. The
employment statistics include the five large metal mines, one
operating coal mine, exploration projects, and the placer mining
industry.
SENATOR BISHOP returned attention to slide 2 and pointed out the
average annual salary of $108,000 includes jobs on rotation,
which is a fantastic salary. He then directed attention to
slide 24 and noted small miners help make discoveries for big
mines.
1:02:20 PM
ADJOURNMENT
There being no further business before the committees, the joint
meeting of the House and Senate Resource Standing Committees was
adjourned at 1:02 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Senate Resources - Hearing Agenda - 2 - 13 - 2018.pdf |
SRES 2/13/2018 12:00:00 PM |
|
| Senate & House Resources - Presentation - AK Miners Assoc & Council of AK Producers - 2- 13 - 2018.pdf |
SRES 2/13/2018 12:00:00 PM |
Mining |
| Senate & House Resources - Map of Mines in AK - 2 - 13 - 2018.pdf |
SRES 2/13/2018 12:00:00 PM |
Mining |