Legislature(2003 - 2004)
03/08/2004 01:52 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 486
An Act relating to reclamation bonding and financial
assurance for certain mines; relating to financial
assurance limits for lode mines; establishing the mine
reclamation trust fund; and providing for an effective
date.
BOB LOEFFLER, DIRECTOR, DIVISION OF MINING, LAND AND WATER,
DEPARTMENT OF NATURAL RESOURCES (DNR), briefly summarized
mining reclamation problems and the three changes proposed
in HB 486. He explained that a mine damages land to remove
ore and then must restore the land to stable condition. To
ensure that the land is reclaimed, the DNR requires a bond
in an amount sufficient that if the company defaults on the
requirement to reclaim the land, the DNR can seize the bond
and conduct the reclamation itself. The current law was
enacted in 1991 when Alaska had mainly placer mining but
Alaska has developed a large mine industry since that time.
The system has worked well for many years for placer mining
and exploration but it doesn't accommodate the large mines.
Mr. Loeffler stated that this bill would modernize the
reclamation law. The first change is only for large lode
mines and it doesn't affect the placer industry. Current
law sets a $750 per acre reclamation bond limit by the
department. Large mines such as Greens Creek, with about a
$24 million bond, don't reclaim for that amount. This bill
removes that limit for lode mines and requires a bond in the
amount of expected reasonable costs.
Mr. Loeffler explained that the second change expands the
financial instruments that companies can use to satisfy the
larger bond requirement to include corporate guarantees,
certificates of deposit, surety bonds, and letters of
credit.
Mr. Loeffler stated that the third change establishes a Mine
Reclamation Trust Fund as another voluntary way for
companies to satisfy the bond requirement. The Fund has the
advantage to the state of establishing a bond for either
perpetual or long-term reclamation needs. He commented that
Red Dog Mine is expected to need water quality work during
its entire productive life. The department can only bond
for those situations by having a fund that accumulates
interest as a mini-endowment that the mining company pays
into. Companies have the advantage of not being taxed on
interest and earnings.
Representative Fate asked if there has been discussion of
the decreasing 5% annual fee as the pool increases. Mr.
Loeffler explained that the Reclamation Mine Bond Pool for
placer mining requires $37.50 per year per acre. The
department believes that it is an appropriate amount and has
not considered decreasing it. Currently the bond pool has
about $300 thousand in unrestricted corpus.
In response to a question by Representative Fate, Mr.
Loeffler explained that there is an individual trust account
for each lode mine instead of a pooled shared risk. Each
mine's account plus interest would be used for that mine.
Representative Fate asked if the bill excludes companies
with low-grade deposits using the chemical bleaching
process. Mr. Loeffler replied that the historic policy of
the department has been not to allow chemical processing
because that level of bonding could break the bond pool. He
advised that placer mines don't use chemicals because it is
free gold. Representative Fate commented that there has
been discussion of using chemical reduction. Mr. Loeffler
reiterated that chemical processing is excluded because the
value of the reclamation bond would be greater than the
placer mine bond pool and would put the pool at risk.
CLYDE GILESPIE, ALASKA MINERS ASSOCIATION (AMA), stated that
the AMA supports HB 486. The current statute requiring
financial assurance for mining was sponsored by the late
Senator Betty Fahrenkamp in 1990. The statute focused on the
small placer mines and some changes to the statute are
needed to effectively address the financial assurance needed
for large lode mines. Mr. Gilespie said that the AMA has
discussed these changes for several years and has worked
with the DNR and the Department of Environmental
Conservation for more than six months to develop the
language. He urged passage of the bill.
REPRESENTATIVE CROFT MOVED TO ADOPT AMENDMENT 1.
Amendment 1 reads:
Page 3, line 7, after "guarantee":
Insert: "that meet the financial tests set in
regulation by the commissioner"
Page 3, line 10:
Delete: "sinking fund"
Page 3, line 10, after "financial assurance"
Insert: "that meet the financial test or other
conditions set in regulation by the commissioner"
Renumber accordingly.
Vice-Chair Meyer OBJECTED for purposes of discussion.
Representative Croft explained that he had discussed with
Mr. Loeffler a sufficient financial guarantee and methods to
set parameters for the department. The approach was too
limiting on the department's discretion and led to the
approach in the amendment that whatever mechanisms the
department wants would be put into regulation. The amendment
ensures that the financial test of adequate corporate
guaranty will be in regulation.
Mr. Loeffler explained that corporate guarantees are useful
when a corporation has assets, and can sometimes be
problematic for reclamation. Putting a financial test into
regulation would ensure that a corporation is viable. The
DNR runs a separate program for coal reclamation, and
Usibelli Corporation has a financial guaranty under a
separate statute. He said that issuing regulations is a
useful procedure that helps the public.
Vice-Chair Meyer WITHDREW his OBJECTION. Amendment 1 was
adopted.
Representative Stoltze expressed concern about complaints by
agriculture in his district that the larger federal
reclamation projects don't use Alaskan seed.
Vice-Chair Meyer asked for explanation of the small fiscal
note.
Mr. Loeffler stated that there is a zero fiscal note from
DNR. The Department of Revenue fiscal note reflects a
charge for managing the reclamation trust fund at 6 mills,
and $15 thousand to set up the computer program during the
first year. Apart from the $15 thousand, the money would
come from the trust fund itself.
Representative Foster MOVED CSHB 486(FIN). There being NO
OBJECTION, it was so ordered.
CSHB 486(FIN) was REPORTED out of Committee with a "do pass"
recommendation and with two previously published fiscal
notes.
A brief At-ease was taken.
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