Legislature(2003 - 2004)
03/03/2004 03:30 PM Senate RES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 339-MINING RECLAMATION ASSURANCES/FUND
VICE CHAIR THOMAS WAGONER announced SB 339 to be up for
consideration.
MR. BOB LOEFFLER, Director, Division of Mining, Land and Water,
Department of Natural Resources (DNR), said that SB 339 brings
DNR's reclamation bonding program into the era of the large
mines like Fort Knox, True North, and in the future, Donlin. He
asked to spend a minute on reclamation, a minute on a problem
with existing law and then explain the three major changes in
the bill.
Before a mine begins, DNR requires a reclamation bond so if the
company defaults, the bond can be seized to reclaim the mine.
The law went into effect in 1991 when Alaska had only placer
mines. Since then, a number of large mines have been developed
and the current bonding program that has worked so well for the
placer mining industry needs some updating to accommodate large
mines.
The three changes SB 339 makes are first, it expands the $750
cap for large mines. Placer mines currently have a $750 per acre
cap, but it costs large mines much more than that to reclaim
land. Greens Creek and Pogo have $24 million and $26 million
bonds, for instance. Companies thus far have been voluntarily
putting up a bigger bond. SB 339 removes the $750 cap for large
mines, but keeps the program working as it has for exploration
and placer mines.
The second change expands the suite of financial instruments
that companies can use to satisfy the bonding requirement to
include CDs, cash, surety insurance and things like that.
The third change establishes a mine reclamation trust fund, a
voluntary alternate method to meet bonding requirements. A mine
company would provide money to the state that would hold the
money for the reclamation. The fund builds interest that would
not be taxed (since the state government is not taxed).
The advantages to the state are twofold. One is that
it provides a mechanism for us to bond long-term or
perpetual reclamation needs. So, for example, if Red
Dog Mine, as expected, is going to need perpetual
water quality treatment, that is water treatment
forever, to satisfy that with a bond, you need a bond
that retains the interest, a mini-permanent fund.
Illinois Creek is going to need 30 years of
monitoring. That's a much smaller bond if we can
retain the interest. So, for the state, it provides us
a way to accommodate the perpetual or long-term
reclamation needs, a situation we only have with the
large mines, not the placer industries.
The second advantage is one Mom always told me - cash
is best. Someone has got to put up a bond. If they can
give us cash, that is, in fact, the best security for
the state. The advantages to the company are two-fold.
First, if the state holds the reclamation trust fund,
then, in fact, the interest is tax free, because we're
not a taxable entity. So, there's some advantages to
the company for the state actually holding it.
A typical use might be... if you have a 30-year
mine... as the mine gets closer and closer to closure,
they may be putting more and more money in this trust
fund if they should decide to use it....
MR. RICH HEIG, President, Council of Alaska Producers, said he
is also general manager of Greens Creek Mining Company. The
Producers' Council supported SB 339 because it makes several
important changes to the requirements for bonding and financial
insurance for mining operations. It allows the state to
recognize the higher reclamation requirements associated with
hard rock mining operations as compared to placer operations and
supports what DNR and DEC have been requiring for several years
anyway. It recognizes the needs for companies to have several
methods available to them for providing financial assurances for
reclamation enclosure that Mr. Loeffler has outlined. The cost
and availability of conventional bonds or letters of credit are
becoming much more difficult and this bill would allow for other
means of financial assurance including CDs and corporate
guarantees.
MR. STEVE BORELL, Executive Director, Alaska Miners Association,
supported SB 339 because it makes several important changes to
the requirements for bonding and financial insurance as
described by Mr. Loeffler.
SENATOR GEORGIANNA LINCOLN asked if the trust fund money would
be dedicated to the reclamation or would the Legislature somehow
have access to the cash and be able to use it elsewhere.
MR. LOEFFLER replied that the Department of Law has agreed with
him that the Legislature could never fully be prevented from
doing anything. "I can't bind the hands of future legislators no
matter what my wish is." The way SB 339 is crafted, a contract
or memorandum of understanding (MOU) would be agreed upon with
the company. If the Legislature reappropriated the money out of
the fund, the company would have a legal cause of action against
the state.
SENATOR LINCOLN asked if the company goes out of business and
the reclamation hasn't occurred, would anyone have a cause of
action.
MR. LOEFFLER replied if it's on state land, maybe no one would,
but if it's on private land, like Red Dog, NANA would have a
cause of action.
In general, this is one of our only methods of, in
fact, insuring long-term or perpetual reclamation, but
again, it doesn't bind the hands of future
legislatures.
SENATOR LINCOLN said that she likes the bill, but she didn't
want the Legislature to get its hands on this money if there's a
way to prevent that.
SENATOR DYSON moved to pass SB 339 out of committee with the
accompanying zero fiscal note and individual recommendations.
There were no objections and it was so ordered.
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