Legislature(1999 - 2000)

03/29/2000 12:55 PM House RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                          JOINT MEETING                                                                                         
               HOUSE RESOURCES STANDING COMMITTEE                                                                               
               SENATE RESOURCES STANDING COMMITTEE                                                                              
                         March 29, 2000                                                                                         
                           12:55 p.m.                                                                                           
                                                                                                                                
                                                                                                                                
HOUSE RESOURCES MEMBERS PRESENT                                                                                                 
                                                                                                                                
Representative Bill Hudson, Co-Chair                                                                                            
Representative Carl Morgan                                                                                                      
Representative Reggie Joule                                                                                                     
                                                                                                                                
HOUSE RESOURCES MEMBERS ABSENT                                                                                                  
                                                                                                                                
Representative Beverly Masek, Co-Chair                                                                                          
Representative John Cowdery, Vice Chair                                                                                         
Representative John Harris                                                                                                      
Representative Ramona Barnes                                                                                                    
Representative Jim Whitaker                                                                                                     
Representative Mary Kapsner                                                                                                     
                                                                                                                                
SENATE RESOURCES MEMBERS PRESENT                                                                                                
                                                                                                                                
Senator Rick Halford, Chairman                                                                                                  
Senator Pete Kelly                                                                                                              
Senator Georgianna Lincoln                                                                                                      
                                                                                                                                
SENATE RESOURCES MEMBERS ABSENT                                                                                                 
                                                                                                                                
Senator Robin Taylor, Vice Chairman                                                                                             
Senator Jerry Mackie                                                                                                            
Senator Lyda Green                                                                                                              
Senator Sean Parnell                                                                                                            
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                       
                                                                                                                                
Representative Gene Therriault                                                                                                  
Representative Gail Phillips                                                                                                    
Representative John Davies                                                                                                      
Representative Alan Austerman                                                                                                   
Representative Eldon Mulder                                                                                                     
                                                                                                                                
COMMITTEE CALENDAR                                                                                                              
                                                                                                                                
Cominco Presentation: Red Dog Mine                                                                                              
                                                                                                                                
                                                                                                                                
PREVIOUS ACTION                                                                                                                 
                                                                                                                                
No previous action to record.                                                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                                
                                                                                                                                
DOUG HORSWILL, Vice President                                                                                                   
Environment and Corporate Affairs                                                                                               
Cominco Ltd.                                                                                                                    
POSITION STATEMENT:   Presented information  on Cominco,  the zinc                                                              
market and the Red Dog Mine.                                                                                                    
                                                                                                                                
HELVI SANDVIK, President                                                                                                        
NANA Development Corporation                                                                                                    
POSITION STATEMENT:   Discussed NANA's partnership  and the impact                                                              
of the Red Dog Mine.                                                                                                            
                                                                                                                                
JOHN KEY, General Manager                                                                                                       
Red Dog Operations                                                                                                              
Cominco Alaska Incorporated                                                                                                     
Red Dog Mine                                                                                                                    
P.O. Box 1230                                                                                                                   
Kotzebue, Alaska 99752                                                                                                          
POSITION STATEMENT:  Discussed the  Red Dog Mine and the necessary                                                              
requirements for development in Northwest Alaska.                                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                                
                                                                                                                                
TAPE 00-26, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CO-CHAIR HUDSON  called the joint  meeting of the  House Resources                                                              
Standing Committee and the Senate  Resources Standing Committee to                                                              
order at  12:55 p.m.   Members present at  the call to  order were                                                              
Representatives  Hudson  and  Joule, and  Senators  Halford,  Pete                                                              
Kelly and  Lincoln; Representative  Morgan arrived as  the meeting                                                              
was  in   progress.     Other  legislators   in  attendance   were                                                              
Representatives  Therriault,   Phillips,  Davies,   Austerman  and                                                              
Mulder.                                                                                                                         
                                                                                                                                
Number 0138                                                                                                                     
                                                                                                                                
DOUG HORSWILL, Vice President, Environment  and Corporate Affairs,                                                              
Cominco  Ltd.,   introduced  those  present.     He  informed  the                                                              
committees  that  he would  be  discussing  Cominco and  the  zinc                                                              
market, and the Red Dog Mine in relation  to the zinc market.  The                                                              
presentation  was   titled  "Partnership  for  Prosperity."     He                                                              
informed listeners  that the primary partnership  is between NANA,                                                              
who owns  the resource,  and Cominco, who  is the "money  company"                                                              
responsible for development;  the state is also  a partner through                                                              
AIDEA  (Alaska  Industrial Development  and  Export  Association).                                                              
Mr. Horswill  noted that Cominco is  a little less than  100 years                                                              
old and is  primarily focused on  zinc; it is the  world's largest                                                              
zinc mining company, is the fourth-largest  zinc refining company,                                                              
and has  the world's  largest ore  reserves, which  is really  Red                                                              
Dog.                                                                                                                            
                                                                                                                                
MR.  HORSWILL discussed  zinc,  the primary  product  of Red  Dog,                                                              
noting that lead is also produced  and that there is silver in the                                                              
ore.   He explained  that the primary  use of  zinc is  to protect                                                              
steel from rust.  Furthermore, zinc  is a component of brass.  Mr.                                                              
Horswill pointed out that zinc is  essential for human health as a                                                              
micronutrient.   Zinc is a product  of the future  and consumption                                                              
is fairly widespread; Western Europe  is the largest consumer, and                                                              
the  United States  makes  up 20  percent  of  the world's  [zinc]                                                              
market.   The Asian  and Latin  American markets  are the  fastest                                                              
growing markets.                                                                                                                
                                                                                                                                
MR.  HORSWILL said  zinc's fairly  strong  growth is  tied to  the                                                              
growth of the world economy.  For  instance, from 1980 to 1999 [it                                                              
grew]  at  about  2.4  percent,   which  is  about  the  level  of                                                              
industrial production  growth in the  Western world.  In  1997 and                                                              
1998, there was the decline in Asia,  which impacted the growth of                                                              
zinc,  although it  rebounded quickly.   He  anticipates a  higher                                                              
trend in  the future  as the Third  World catches  up in  terms of                                                              
construction and  infrastructure development.  Therefore,  Red Dog                                                              
and its  future are based  in a strong  and growing  world market.                                                              
The Red Dog Mine  is the largest zinc mine in  the world, with the                                                              
second largest being  Century, which is located in  Australia.  It                                                              
is  yet to  be seen  whether Century  will achieve  its target  of                                                              
500,000 tons of annual production,  he noted.  However, Red Dog is                                                              
already producing above capacity at 520,000 tons.                                                                               
                                                                                                                                
Number 0603                                                                                                                     
                                                                                                                                
SENATOR  LINCOLN  inquired  as  to   the  impacts  Red  Dog  would                                                              
experience if Century comes on board  [at almost the same level as                                                              
Red Dog].                                                                                                                       
                                                                                                                                
MR. HORSWILL  said he  anticipates,  in the short  term, that  the                                                              
amount of revenue  that Red Dog earns from concentrate  sales will                                                              
be reduced for  about a year.  He explained  that concentrate from                                                              
the mine is sent to a smelter refinery  complex in order to change                                                              
it into metal, and there is a charge  at the smelter refinery that                                                              
is implied.   The more  concentrate available  in the  market, the                                                              
higher  the charge;  thus, as  that charge  increases, the  actual                                                              
revenues of  the mine fall.   However, that impact is  expected to                                                              
be short-term because  with growth at 2.5-3.0  percent, the amount                                                              
of  zinc demand  increase  is rapid.   Therefore,  the  additional                                                              
production from  Century will be  quickly absorbed.   In addition,                                                              
many major  mines are close to  the end of their  lives, including                                                              
two mines owned by Cominco:  Polaris,  located in the high Arctic,                                                              
and Kimberly, in  the interior of British Columbia.   Both will go                                                              
off production  by 2001/2002.  He  indicated it may take  a couple                                                              
of years for the market to catch up, but it will happen.                                                                        
                                                                                                                                
Number 0725                                                                                                                     
                                                                                                                                
MR. HORSWILL pointed  out that another way to look  at the size of                                                              
an operation  for a  mine is in  the ore  reserves in the  ground,                                                              
which really  determine the life,  size and opportunities  of that                                                              
operation.  In  this area, Red Dog really shines  because in terms                                                              
of actual reserves and resources  in the ground, Red Dog is almost                                                              
twice the size of Century.  In terms  of reserves, McArthur River,                                                              
Australia,  is the  next largest  producing mine;  however, it  is                                                              
substantially smaller.  Due to exploration  in the last year and a                                                              
half, it is known that Red Dog will be larger [in the future].                                                                  
                                                                                                                                
MR. HORSWILL  turned to the benefits  that Red Dog has  brought to                                                              
Alaska, such as  jobs.  Red Dog employs about  380-400 people full                                                              
time,  and  there  is  construction   work  that  increases  those                                                              
figures.  [Cominco's] spending in  the state amounts to about $100                                                              
million.   Therefore, he sees a  significant impact as well  as an                                                              
opportunity for  growth.   He pointed out  that over time  more of                                                              
the suppliers  are in Alaska and  thus more capable to  supply the                                                              
necessary things.                                                                                                               
                                                                                                                                
MR.  HORSWILL  turned   to  AIDEA  and  noted   that  the  initial                                                              
investment for the  port was $265 million, and  Cominco's payments                                                              
amounted  to  $125  million,  of which  about  $5-$10  million  is                                                              
retained by AIDEA  and contributed to the statement.   In the end,                                                              
[Cominco] will have  paid for a port that will be  able to be used                                                              
as a regional facility and infrastructure in Northwest [Alaska].                                                                
                                                                                                                                
Number 0915                                                                                                                     
                                                                                                                                
HELVI SANDVIK, President, NANA Development  Corporation, explained                                                              
that NANA Development  Corporation is the financial  owner of NANA                                                              
Regional  Corporation.    She announced  that  she  would  briefly                                                              
discuss NANA's  partnership and the impact  of Red Dog.   She said                                                              
that Red Dog has allowed the NANA  region to move down the path of                                                              
self-sufficiency,  as it  has created job  opportunities;  it also                                                              
has allowed  NANA to benefit from  the royalty stream and  to look                                                              
for  new  business  opportunities.    For  example,  NANA  service                                                              
companies receive  about $14 million of payments  from Cominco for                                                              
services provided to  Red Dog.  Through the life  of Red Dog, NANA                                                              
has received  approximately  $50 million  in royalty payments,  of                                                              
which  half  have  been  distributed to  the  other  regional  and                                                              
village corporations  across the state.  Therefore,  the financial                                                              
benefits of Red Dog have been spread  across the state.  Annually,                                                              
Red Dog pays about  $13 million in wages to residents  of the NANA                                                              
region, and  another $13-$14  million in wages  are paid  to other                                                              
Alaskans living throughout the state.                                                                                           
                                                                                                                                
MS. SANDVIK reiterated  that Red Dog has opened the  door to other                                                              
opportunities.  She explained, "Early  on, the vision was that the                                                              
infrastructure that  would be put  into place to support  the mine                                                              
would also  be used  as a benefit,  to reduce  the cost  of living                                                              
within  our  region."   As  a  Native corporation  with  a  profit                                                              
objective,  NANA sees a  larger benefit/obligation  to reduce  the                                                              
cost of living.  Ms. Sandvik noted  that NANA has begun to realize                                                              
the dream  this past  year.   For example,  NANA has been  working                                                              
with Cominco and other partners in  order to take advantage of the                                                              
port  and the  large fuel  storage capacity,  which would  provide                                                              
fuel delivery to some of the villages  located on rivers where the                                                              
barges cannot necessarily  come up every year.   Therefore, [NANA]                                                              
has been  able to  deliver fuel  at a  lower cost  to some  of the                                                              
villages   that  have   historically  struggled.     Ms.   Sandvik                                                              
acknowledged that  there are other opportunities:   as the current                                                              
infrastructure needs to be modified  in the future, the benefit of                                                              
that will  go beyond Red  Dog.  Therefore,  she believes  that the                                                              
state will  experience the benefit for  many years to come.   From                                                              
NANA's  perspective, Red  Dog has  had a tremendous  start  and is                                                              
moving in the right direction.                                                                                                  
                                                                                                                                
CHAIRMAN  HALFORD inquired  as to the  current royalty  percentage                                                              
that NANA receives.                                                                                                             
                                                                                                                                
MS. SANDVIK noted that the [royalty]  percentage varies because it                                                              
is dependent  upon production.  In  1999 NANA received  about $6.5                                                              
million in royalty  payments; in accordance with  the [7I] sharing                                                              
provisions  of ANCSA  (Alaska Native  Claims  Settlement Act),  50                                                              
percent of that was shared with other corporations.                                                                             
                                                                                                                                
[MR.  KEY],  in response  to  Chairman  Halford, said  that  would                                                              
amount to 4.5 percent.                                                                                                          
                                                                                                                                
Number 1140                                                                                                                     
                                                                                                                                
JOHN  KEY, General  Manager, Red  Dog  Operations, Cominco  Alaska                                                              
Incorporated,  informed  everyone   that  Red  Dog  Operations  is                                                              
basically the Red  Dog Mine and the operating unit  for the DeLong                                                              
Mountain Transportation  System.  He pointed out that  the Red Dog                                                              
Mine began  production in  1989 and  has been  in a steady  growth                                                              
pattern since.   In  1999, Red  Dog produced  1.1 million  tons of                                                              
concentrate, of which 940,000 tons  was zinc concentrate.  Red Dog                                                              
has demonstrated  ten years  of growth;  in February, Cominco  and                                                              
NANA jointly  approved an  expenditure of $90  to $100  million to                                                              
increase  zinc  production  at  Red Dog.    Therefore,  Red  Dog's                                                              
production will increase to 1.3 million  tons of concentrate, with                                                              
1.1  million   being  zinc  concentrate.     In  regard   to  mill                                                              
optimization, Mr.  Key specified that $100 million  will be spent,                                                              
[of which]  $20-$30 million  will be spent  in Alaska.   This will                                                              
begin with  the construction  of two modules  in the  NANA Cominco                                                              
Construction Facility  in Anchorage, and thus production  [of zinc                                                              
concentrate] will  increase to 200,000  tons.  Therefore,  Red Dog                                                              
Mine will  secure its  position as  the largest  zinc mine  in the                                                              
world.  He  echoed Mr. Horswill's  testimony in regard to  Red Dog                                                              
having the largest zinc reserves in the world.                                                                                  
                                                                                                                                
MR. KEY  pointed out that  there is a  cluster of four  ore bodies                                                              
located immediately  around Red  Dog.   Furthermore, there  is the                                                              
Su-Lik, the original  deposit, and the New Discovery,  which holds                                                              
12 million tons of 20 percent zinc.   Winter stopped the drilling,                                                              
he  noted,  and  in  another  month,   efforts  will  continue  to                                                              
determine  how  large  the  New Discovery  really  is.    The  New                                                              
Discovery  is exciting  because it  is the first  time that  high-                                                              
grade zinc  has been found away from  the main pit.   However, the                                                              
tough part  of the New  Discovery is that  it is 2,000  feet deep.                                                              
Mr. Key specified that those six  ore bodies represent exploration                                                              
of about 10,000  acres of land.  Cominco and  NANA jointly control                                                              
over 200,000  acres  of land with  the same  geology.   Therefore,                                                              
exploration of the  area is just beginning.  He  informed everyone                                                              
that  about $4  million  will be  spent  on exploration,  and  the                                                              
exploration  program will  continue for  several more  years.   In                                                              
response to Senator Lincoln, Mr.  Key specified that New Discovery                                                              
is six miles  from Red Dog and  Su-Lik is about 13 miles  from Red                                                              
Dog.                                                                                                                            
                                                                                                                                
MR. KEY turned  to the questions  of what it will take  to convert                                                              
this  to operations  and to  start  generating the  jobs so  badly                                                              
needed   in   Northwest  Alaska.      He   said  the   answer   is                                                              
infrastructure.   Cominco, with  bonding help  from the  state and                                                              
the political  will of NANA,  was able to  put Red Dog in,  and to                                                              
make it  work in adverse  conditions.  Red  Dog is one of  a kind.                                                              
None  of the  six deposits  match  Red Dog  in terms  of grade  or                                                              
accessibility.   He expressed  the importance  of noting  that Red                                                              
Dog has  paid its  own way  and has  been a  benefit to NANA,  the                                                              
Northwest Arctic Borough, AIDEA and  the state as it has generated                                                              
jobs  and   revenue  for   each.    He   said  a  combination   of                                                              
infrastructure and  new technology will  be necessary in  order to                                                              
develop those six deposits.                                                                                                     
                                                                                                                                
MR. KEY  stated that the first  infrastructure item that  needs to                                                              
be addressed in Northwest Alaska  is power.  He said the long-term                                                              
answer  is  not  continued duplication  of  five  megawatt  diesel                                                              
generators,  "which is  what we  use."   He pointed  out that  the                                                              
power demand  in Northwest  Alaska  has not been  great enough  to                                                              
justify  a  power plant.    However,  in  order  for the  Red  Dog                                                              
District to  develop into multiple  operations, there has to  be a                                                              
stable, economic  form of power.   Although this region  of Alaska                                                              
is not  known for its  gas resources,  [Cominco] has  been working                                                              
hard  to  develop shale  gases  in  this  region.   He  identified                                                              
another solution for power as coal  because 90 miles north of [Red                                                              
Dog], in  the Arctic reserve, are  some of the best  coal reserves                                                              
in  the world.   Initially,  it  is estimated  that  [the Red  Dog                                                              
District's]  power consumption  in this  area would  be about  100                                                              
megawatts  and  would easily  increase  to  250 megawatts  in  ten                                                              
years.                                                                                                                          
                                                                                                                                
MR.  KEY   identified  the   second  requirement  [necessary   for                                                              
development  in Northwest  Alaska] as  the transportation  system.                                                              
He informed  everyone that Cominco  Alaska has been  working since                                                              
1967  to  develop  a  deep-water   port  at  the  DeLong  Mountain                                                              
Transportation System Facility, which  would be referred to as the                                                              
DeLong Mountain Terminal.  He reviewed  the capacity that it could                                                              
handle and noted that it could be  upgraded for the exportation of                                                              
coal.   The  current  barge loading  terminal  is inefficient  and                                                              
approaching capacity.   Therefore, none of the other  mines can be                                                              
developed or  brought on  line until the  port is addressed.   Mr.                                                              
Key also  noted that  there is  a 54-mile  road that connects  the                                                              
mine to  the barge-loading terminal.   Further development  of the                                                              
other  zinc  ore bodies  or  coal  will require  a  transportation                                                              
infrastructure, whether it be additional roads or a railroad.                                                                   
                                                                                                                                
MR. KEY said  the third requirement [necessary  for development in                                                              
Northwest Alaska] is  that skilled people have to  be available to                                                              
operate the  mines and  the power plant.   Although importing  the                                                              
[people with] skills to Northwest  Alaska may be a solution, it is                                                              
not the  right solution to address  the needs and  unemployment in                                                              
the area.   In  order to develop  the skills,  there must  be top-                                                              
quality  education,  properly  funded   technical  schools  and  a                                                              
university system  providing the skills.  [Red  Dog] realizes that                                                              
this  isn't solely  a state  problem and  thus currently  sponsors                                                              
nine full-time  university scholarships.  Additionally,  there are                                                              
six job-share participants in college,  and this year there are 18                                                              
persons  enrolled   in  the  pre-apprenticeships  at   the  Alaska                                                              
Technical  Center.   These  efforts are  beneficial  in regard  to                                                              
those employed at Red Dog.  In regard  to skilled workers, Red Dog                                                              
has  experienced an  increase from  7 to  32 skilled  shareholders                                                              
over the last ten years.  Furthermore,  Red Dog's management staff                                                              
has  grown from  6 to  22, and  total  shareholder employment  has                                                              
increased from  156 to  231, which represents  60 percent  of [Red                                                              
Dog's] workforce.                                                                                                               
                                                                                                                                
MR.   KEY  identified   the   last  requirement   [necessary   for                                                              
development  in  Northwest  Alaska]  as  permitting.    Presently,                                                              
Alaskan  industries' biggest  concern  is that  the government  is                                                              
committed to blocking further resource  development in this state,                                                              
and it maintains primacy over two  out of three of the prime areas                                                              
of  air, water  and  waste.   He pointed  out  that state  primacy                                                              
allows decisions to  be made at a state level,  by individuals who                                                              
understand local conditions  and issues, and who  respond to state                                                              
leadership.   Furthermore,  industry, under  state primacy,  has a                                                              
better chance  to see regulators  work with [other]  regulators on                                                              
their  permits.    Other benefits  include  timeliness  and  cost-                                                              
effectiveness.                                                                                                                  
                                                                                                                                
MR. KEY  asserted that the  Environmental Protection  Agency (EPA)                                                              
has   no flexibility in  regard to water  permits.  The  tools the                                                              
state  has are  the following:    mixing zones,  reclassification,                                                              
site-specific  criteria  and  variances.     However,  Alaska,  at                                                              
present, does not  have a certified water permitting  program.  He                                                              
noted that AIDEA and the Alaska Department  of Fish & Game (ADF&G)                                                              
have  worked  hard   to  ensure  that  Red  Dog   receives  proper                                                              
consideration for  its natural conditions whenever  they do permit                                                              
certification  for EPA.   Still, the  final decisions remain  with                                                              
EPA.   Mr. Key remarked,  "Without the good  work of AIDEA,  to be                                                              
quite  honest,  Red  Dog  would  be  a  past  mine  instead  of  a                                                              
developing mining district."                                                                                                    
                                                                                                                                
MR.  KEY  pointed   out  that  state  guidelines   and  regulatory                                                              
authority  for   waste  are  also   important  in   that  Alaska's                                                              
reauthorization  of its  waste program could  bring about  simpler                                                              
requirements.  Specifically, simpler  requirements could occur for                                                              
monofill landfills  and construction  demolition waste  landfills.                                                              
Furthermore,  Alaska's  waste program  would  have the  additional                                                              
benefit of  the ability  to work with  the local group  concerning                                                              
tailing impoundments  and being exempted from things  such as fees                                                              
based on volume,  which are tough on mining companies.   In regard                                                              
to air permitting,  that is the only  area in which the  state has                                                              
primacy or "at least we thought they did," he remarked.                                                                         
                                                                                                                                
MR. KEY informed everyone that EPA  has recently told the state it                                                              
can no  longer make  air [quality]  decisions, as  it has  for the                                                              
last  18  years.   The  Governor  and [AVEC,  the  Alaska  Village                                                              
Electric  Cooperative, Inc.]  have been  fighting to maintain  the                                                              
state's rights and  "we" are standing beside the  state in federal                                                              
court.  He said:                                                                                                                
                                                                                                                                
     Ultimately, the  state must have the right  to determine                                                                   
     ...   best  available   control  technology,   increment                                                                   
     consumptions,  monitoring,   modeling  requirements  and                                                                   
     protocol.   An  air program  regulated by  an office  in                                                                   
     Seattle will  mean the end  of any significant  resource                                                                   
     development  in Alaska,  and Alaska  would no longer  be                                                                   
     open for business.                                                                                                         
                                                                                                                                
Number 1710                                                                                                                     
                                                                                                                                
MR. KEY turned to  the his vision of what the  next ten to fifteen                                                              
years could  look like  in Northwest Alaska.   Currently,  the Red                                                              
Dog Mine is connected to the DeLong  Mountain Transportation port,                                                              
which has a barge-loading terminal.   At present, ships are loaded                                                              
three miles offshore.  He informed  everyone that the first change                                                              
has been to construct  a deep-water loading facility.   The second                                                              
requirement was the  power plant, he noted; if  powered with coal,                                                              
it  would  require  a  transportation   system.    Therefore,  the                                                              
transportation  system  will have  to  connect to  the  port.   He                                                              
pointed  out  that [if  these  requirements  are filled]  the  New                                                              
Discovery  [Mine]  could  be developed  as  a  conventional  mine.                                                              
However, the  Hilltop [Mine] would  require new technology,  which                                                              
would  allow [shipment]  of  straight zinc  metal  - the  finished                                                              
product, not  zinc concentrate.   The Su-Lik [Mine] is  similar in                                                              
that it could potentially produce  zinc metal with new technology.                                                              
                                                                                                                                
MR.  KEY  noted  that  the  new  technology  requires  huge  power                                                              
consumption  because   each  operation  would  require   about  90                                                              
megawatts of power.   The power plants would provide  power to the                                                              
facilities, but  "they" would also  look towards taking  power and                                                              
setting  an initial  grid, which  would  solve some  of the  power                                                              
problems  in villages  and move  toward eliminating  the need  for                                                              
assisted power in  Northwest Alaska.  He specified  that this area                                                              
is  going from  one  mine and  a  barge-loading  terminal to  five                                                              
mines, services and  a deep-water port.  This area  will move from                                                              
successfully  training  and employing  500  people  to over  2,000                                                              
people.   Furthermore,  the  power grid  will  solve problems  and                                                              
provide reasonably  priced power to  [Northwest Alaska].   Mr. Key                                                              
emphasized that  this is  the vision for  the next ten  to fifteen                                                              
years,  and "these  are  the  things we  need  help  with, to  get                                                              
there."   He  noted that  there has  been  continued contact  with                                                              
Senators  Murkowski  and Stevens  in  regard  to these  plans  and                                                              
ideas; both  senators have expressed  great interest.   He offered                                                              
to answer any questions.                                                                                                        
                                                                                                                                
Number 1951                                                                                                                     
                                                                                                                                
SENATOR  LINCOLN  recalled a  visit  to  Korea with  the  regional                                                              
corporations,  including NANA  Regional Corporation.   The  Korean                                                              
government and  Korean industries were  very interested in  a coal                                                              
mine  in [the  Red Dog  District].   The  only  hesitation was  in                                                              
regard to getting the product to  a deep-water port.  She asked if                                                              
there was another site being looked at, for a deep-water port.                                                                  
                                                                                                                                
MR. KEY replied,  "Certainly, I don't believe it  would be North."                                                              
He  recalled discussions  with  those from  the  Arctic Slope  and                                                              
pointed out  that [in  that area]  one would have  to go  about 11                                                              
miles offshore  in order to be  in deep enough water.   Therefore,                                                              
he  guessed that  perhaps they  were  referring to  the area  near                                                              
Nome; otherwise he didn't know.                                                                                                 
                                                                                                                                
AN UNIDENTIFIED  SPEAKER said  that the  original study  looked at                                                              
Cape Safety on the south side of  the Seward Peninsula for a year-                                                              
round  deep-water port.    However, that  would  require over  700                                                              
miles  of transportation  to move  the product  to the  deep-water                                                              
site.  She informed everyone that  more recent studies have looked                                                              
directly offshore  of the Holst Mine (ph) (indisc.)  resources and                                                              
then continuing  to evaluate the DeLong Mountain  [Transportation]                                                              
System in trying to utilize Red Dog.                                                                                            
                                                                                                                                
SENATOR LINCOLN  asked if this was  the coal mine that  [Korea was                                                              
interested  in], which  had a  lower concentrate  of moisture  and                                                              
could be burned more efficiently.                                                                                               
                                                                                                                                
MR. KEY indicated that Senator Lincoln was correct.                                                                             
                                                                                                                                
REPRESENTATIVE PHILLIPS  inquired as to how far one  would have to                                                              
go out [for a deep-water port], if  "they" did tie into the DeLong                                                              
Mountain [Transportation] System.                                                                                               
                                                                                                                                
MR. KEY explained, "This extension  is 2,700 feet of conveyor, and                                                              
then the actual dredge channel ...  is about 10,000 feet long, the                                                              
area that  has to be dredged.   It's going  from zero to  about 20                                                              
[feet]  of depth  in the  dredge."   He noted  that currently  the                                                              
[U.S.  Army] Corps  of Engineers  is  permitting this,  performing                                                              
environmental studies this summer  and checking the work that [Red                                                              
Dog] has  done.  Therefore,  it is anticipated  that the  Corps of                                                              
Engineers will complete its work and have permits by June 2002.                                                                 
                                                                                                                                
CO-CHAIR HUDSON thanked everyone.                                                                                               
                                                                                                                                
SENATOR  LINCOLN noted  her appreciation  of seeing  the "Made  in                                                              
Alaska" symbol  as well as the  number of employees in  Alaska and                                                              
the money that stays in the state.                                                                                              
                                                                                                                                
REPRESENTATIVE  JOULE remarked  that  one of  the issues  [Alaska]                                                              
grapples with  is subsistence in  regard to development.   He said                                                              
he  believes  this is  an  excellent  model  with respect  to  how                                                              
development  can  be achieved  and  still  take into  account  the                                                              
issues that  are important to the  people who live in the  area of                                                              
the development                                                                                                                 
                                                                                                                                
CO-CHAIR   HUDSON   agreed   with   both   Senator   Lincoln   and                                                              
Representative  Joule  in that  [the  Red Dog  Mine]  has been  an                                                              
excellent project.   He  expressed the need  for everyone  to work                                                              
together to see that it happens.                                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
The joint  meeting of the  House Resources Standing  Committee and                                                              
the  Senate Resources  Standing Committee  was  adjourned at  1:35                                                              
p.m.                                                                                                                            
                                                                                                                                

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