Legislature(2019 - 2020)BELTZ 105 (TSBldg)

02/11/2020 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

Audio Topic
03:39:08 PM Start
03:40:21 PM Presentation: Susitna-watana Hydroelectric Project
04:04:35 PM Presentation: Ambler Mining District Industrial Access Project
04:41:54 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
"Susitna-Watana Project & Ambler Road Project"
by Tom Boutin, Alaska Industrial Development &
Export Authority (AIDEA) & Curtis Thayer, Alaska
Energy Authority (AEA)
-- Teleconference Listen Only --
                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                       February 11, 2020                                                                                        
                           3:39 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Click Bishop, Chair                                                                                                     
Senator Peter Micciche, Vice Chair                                                                                              
Senator Lyman Hoffman                                                                                                           
Senator Mike Shower                                                                                                             
MEMBERS ABSENT                                                                                                                
Senator Elvi Gray-Jackson                                                                                                       
COMMITTEE CALENDAR                                                                                                            
PRESENTATION: SUSITNA-WATANA PROJECT                                                                                            
     - HEARD                                                                                                                    
PRESENTATION: AMBLER MINING DISTRICT INDUSTRIAL ACCESS PROJECT                                                                  
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
CURTIS W. THAYER, Executive Director                                                                                            
Alaska Energy Authority                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Participated in the overview of the Susitna-                                                              
Watana Hydroelectric Project.                                                                                                   
BRYAN CAREY, Group Manager                                                                                                      
Owned Assets/Hydro                                                                                                              
Alaska Energy Authority                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Participated in the overview of the Susitna-                                                              
Watana Hydroelectric Project.                                                                                                   
TOM BOUTIN, Executive Director                                                                                                  
Alaska Industrial Development and Export Authority                                                                              
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT: Provided  an  overview of  the Amber  Mining                                                             
District Industrial Access Project.                                                                                             
ACTION NARRATIVE                                                                                                              
3:39:08 PM                                                                                                                    
CHAIR  CLICK  BISHOP called  the  Senate  Community and  Regional                                                             
Affairs Standing Committee meeting to  order at 3:39 p.m. Present                                                               
at  the call  to  order  was Senator  Hoffman  and Chair  Bishop.                                                               
Senators Micciche and Shower arrived soon thereafter.                                                                           
^PRESENTATION: Susitna-Watana Hydroelectric Project                                                                             
       PRESENTATION: Susitna-Watana Hydroelectric Project                                                                   
3:40:21 PM                                                                                                                    
CHAIR  BISHOP announced  the presentation  on the  Susitna-Watana                                                               
Hydroelectric Project.                                                                                                          
3:40:32 PM                                                                                                                    
SENATOR SHOWER joined the committee meeting.                                                                                    
3:40:56 PM                                                                                                                    
CURTIS W.  THAYER, Executive  Director, Alaska  Energy Authority,                                                               
Anchorage, Alaska,  explained that the presentation  looks at the                                                               
Susitna-Watana Hydroelectric Project, which  has been in abeyance                                                               
since 2015. No  state money has been used to  further the project                                                               
since then.                                                                                                                     
MR. THAYER  stated that Susitna-Watana hydro  would provide clean                                                               
and reliable  energy for the  next 100 years. He  paraphrased the                                                               
current status of the project as it appears on slide 3:                                                                         
   • In 2014, Administrative Order (AO) 271 placed the Susitna-                                                                 
     Watana Hydroelectric Project into abeyance                                                                                 
   • In 2019, AO 306 rescinded AO 271                                                                                           
   • No state funds were spent in Fiscal Year 2019                                                                              
MR. THAYER  read the State Energy  Policy as it appears  on slide                                                               
   • In 2010, House Bill 306 was passed and set an aspirational                                                                 
     goal to generate 50 percent of the state's electricity from                                                                
     renewable and alternative energy by 2025                                                                                   
3:42:07 PM                                                                                                                    
MR. THAYER  turned to slide  5 that  asks, "Why Large  Hydro?" He                                                               
reported that in  2011, 21 percent of Alaska had  hydro power and                                                               
that increased to  27 percent by 2019. He  acknowledged that this                                                               
is clearly  not the 50/50  goal that the  legislature established                                                               
in 2010.                                                                                                                        
MR. THAYER paraphrased the powers  of the Alaska Energy Authority                                                               
(AEA) under AS 44.83.080:                                                                                                       
   • (18) to acquire a Susitna River power project, whether by                                                                  
     construction, purchase, gift, or lease, including the                                                                      
     acquisition of property rights and interests by eminent                                                                    
     domain under AS 09;                                                                                                        
   • (19) to perform feasibility studies and engineering and                                                                    
     design with respect to power projects.                                                                                     
He noted that AEA serves as the energy office for the state.                                                                    
3:42:42 PM                                                                                                                    
SENATOR MICCICHE joined the committee meeting.                                                                                  
MR. THAYER deferred to Mr. Carey to continue the presentation.                                                                  
3:43:08 PM                                                                                                                    
BRYAN  CAREY, Group  Manager, Owned  Assets/Hydro, Alaska  Energy                                                               
Authority, Anchorage,  Alaska, began  by providing  an historical                                                               
context. He related that in  2010, AEA was tasked with evaluating                                                               
Susitna-Watana,  Chakachamna,  and   Glacier  Fork  hydroelectric                                                               
projects. Glacier Fork was dropped  from consideration due to its                                                               
small size  and not having  water storage during the  winter. AEA                                                               
went  forward  with the  preliminary  decision  document for  the                                                               
Susitna-Watana site  because it was more  likely than Chakachamna                                                               
to  significantly  contribute  towards  50  percent  of  Railbelt                                                               
electrical  demand. It  had greater  winter storage  capacity and                                                               
fewer engineering  and licensing  challenges, and it  appeared to                                                               
be the better project to operate for 100 years.                                                                                 
3:44:09 PM                                                                                                                    
MR.  CAREY  related  that most  of  Alaska's  good  hydroelectric                                                               
sites,  including   Susitna,  were   identified  in   the  1950s.                                                               
Significant  studies, including  drilling and  fish and  wildlife                                                               
analysis, were done  on the Susitna River in the  early 1980s but                                                               
the  project was  shut  down  in the  mid-1980s  [because of  oil                                                               
prices].  Microfiche documents  relating  to  those studies  were                                                               
retained and  used in  2010 to restart  the project.  This effort                                                               
continued until the governor suspended the project in 2017.                                                                     
MR. CAREY displayed  the map depicted on slide 9  that shows that                                                               
the  Susitna-Watana project  is located  approximately 125  miles                                                               
northeast  of Anchorage  and 125  miles south  of Fairbanks.  The                                                               
site is 187  river miles up from Cook Inlet,  above Devils Canyon                                                               
and  Talkeetna.  The  basin  drains  approximately  5,000  square                                                               
3:45:51 PM                                                                                                                    
MR. CAREY said  the height of the dam is  approximately 705 feet,                                                               
assuming that bedrock  is about 100 feet below  the river bottom.                                                               
The  elevation of  the  dam  is 2,065  feet,  the  length of  the                                                               
reservoir is approximately  42 miles and the width  is about 1.25                                                               
miles. The  installed capacity  is 459  megawatts at  the average                                                               
water  level  with a  drawdown  of  200  foot.  He noted  that  a                                                               
drawdown  of 100  feet produces  less energy  per unit  of water.                                                               
Energy  production   of  619  megawatts  is   achieved  when  the                                                               
reservoir is  full. The annual  energy production of  2.8 million                                                               
megawatt hours (MWh) is approximately  60 percent of the Railbelt                                                               
demand. The cost  in 2014 was approximately $5.6  billion, a 50th                                                               
percentile measurement.                                                                                                         
3:47:13 PM                                                                                                                    
MR. CAREY explained  that dam size and  energy generation depends                                                               
on the topography and water  quantity analysis. Building a higher                                                               
dam means  a thicker  dam and  added costs, but  a lower  dam has                                                               
less storage capacity and generates less energy.                                                                                
He detailed that the Federal  Energy Regulatory Commission (FERC)                                                               
process  required a  board of  consultants  consisting of  people                                                               
that generally have  40 to 50-plus years in  their specialty. The                                                               
consultants  reviewed  the  design   and  answered  questions  at                                                               
critical points  to make sure the  project was on track.  The dam                                                               
was designed  to withstand a  probable maximum  10,000-year flood                                                               
with  one  spillway  gate  inoperable,  and  a  maximum  credible                                                               
earthquake within the plate in which it resides.                                                                                
MR. CAREY  showed a video  based on engineering drawings  for the                                                               
Susitna-Watana Project.  It shows the dam  from multiple exterior                                                               
and interior views.  He noted that the dam  spillway shoots allow                                                               
for overflow conditions. He said  water will ultimately cover the                                                               
quarry that will be  used to get rock for the  dam, and that will                                                               
provide additional  water storage.  Turbines within the  dam that                                                               
provide  power will  take  up several  levels  and require  large                                                               
quantities of concrete.                                                                                                         
3:51:43 PM                                                                                                                    
CHAIR BISHOP said  he understands that the concrete  used for the                                                               
Hoover Dam is still cooling.                                                                                                    
MR. CAREY replied that is probably true.                                                                                        
He detailed that the video shows a  boom in front of the dam that                                                               
prevents debris  or boats from  getting too close. He  noted that                                                               
the  construction camp  would be  converted into  permanent homes                                                               
for workers and the site would  also have an airstrip for workers                                                               
who commute.                                                                                                                    
3:53:32 PM                                                                                                                    
MR.  CAREY  explained that  in  2015  Northern Economics  did  an                                                               
economic analysis  of the  project, based  on the  2014 projected                                                               
prices of  natural gas, coal, and  oil. Slide 12 states  that the                                                               
analysis came  up with a  benefit-cost ratio of 2.39  from energy                                                               
savings,  $11.2  billion in  energy  savings  over the  first  50                                                               
years, and $4.7  billion in capital and O&M costs  over the first                                                               
50 years, all of which are 2014 dollars.                                                                                        
MR. CAREY  reviewed the  following employment  opportunities that                                                               
Northern Economics projected.                                                                                                   
   • Direct jobs:                                                                                                               
        o 5,000 preconstruction and non-construction jobs (2010-                                                                
        o 12,000 direct overall construction workforce                                                                          
   • Local spending and statewide multiplier effects (2014$):                                                                   
        o Spending on licensing, design, and other program costs                                                                
             square4 Local spending: $814,148,500                                                                               
             square4 Multiplier effects:                                                                                        
                • Business sales: $551,245,700                                                                                  
                  • Jobs: 3,870                                                                                                 
                  • Labor income: $204,254,400                                                                                  
        o Construction Spending                                                                                                 
             square4 Local spending: $2,658,465,300                                                                             
             square4 Multiplier effects:                                                                                        
                  • Business sales: $1,837,133,150                                                                              
                  • Jobs: 11,305                                                                                                
                  • Labor income: $627,307,200                                                                                  
        o Operations Spending                                                                                                   
             square4 Local spending: $26,500,000                                                                                
             square4 Multiplier effects:                                                                                        
                • Business sales: $18,494,000                                                                                   
                  • Jobs: 105                                                                                                   
                  • Labor income: $6,435,000                                                                                    
3:55:40 PM                                                                                                                    
MR.  CAREY  explained  that  AEA  used  an  integrated  licensing                                                               
process and had completed about  two-thirds of the required steps                                                               
before  the project  was suspended.  There were  58 FERC-approved                                                               
studies, 19  of which have  been completed. Some of  the studies,                                                               
such  as  the maximum  flood  or  seismic studies,  were  desktop                                                               
rather  than field  studies. There  are first-year  study results                                                               
from the incomplete  studies and are substantially  along the way                                                               
toward  the  second year  results.  Once  AEA finishes  the  FERC                                                               
studies, the next steps are  an impact assessment, draft license,                                                               
and proposal for  mitigation-enhancement measures. These measures                                                               
will take several years of effort to complete.                                                                                  
3:57:16 PM                                                                                                                    
CHAIR BISHOP  asked if  the existing data  could be  used towards                                                               
the FERC license.                                                                                                               
MR. CAREY  replied all  the data  is good  but FERC  could always                                                               
request more or less data.                                                                                                      
CHAIR BISHOP observed that AEA  was two-thirds of the way through                                                               
the licensing process.                                                                                                          
MR.  CAREY  agreed  that  AEA has  completed  two-thirds  of  the                                                               
initial FERC licensing process.                                                                                                 
MR.  CAREY turned  to  slide 15,  FERC  Study Plan  Determination                                                               
Outcome.  He  explained that  once  the  first-year studies  were                                                               
complete, FERC conducted a review  for adequacy. Several agencies                                                               
requested modifications  to the  studies, but FERC  rejected most                                                               
of  those requests.  The project  was suspended  soon after  that                                                               
3:58:54 PM                                                                                                                    
MR. CAREY  displayed slide  16 that depicts  the winding  road of                                                               
the project timeline. The slide contains the following data:                                                                    
   • Pre-Application Phase                                                                                                      
        o 2-3 years                                                                                                             
        o Preparation, planning, collaboration, engineering, and                                                                
          environmental studies                                                                                                 
   • Submit FERC Application                                                                                                    
   • FERC Review and Determination                                                                                              
        o 2 years                                                                                                               
   • Project Execution Phase                                                                                                    
        o Financing and power sales agreements                                                                                  
        o Detailed design                                                                                                       
   • Construction Phase                                                                                                         
        o 9-11 years                                                                                                            
        o Construction                                                                                                          
        o Testing                                                                                                               
        o Inspections                                                                                                           
   • Operational Phase                                                                                                          
        o Power generation                                                                                                      
        o Maintenance                                                                                                           
        o Monitoring                                                                                                            
MR. CAREY explained that once  the FERC application is submitted,                                                               
AEA   could   either  move   towards   final   design  and   site                                                               
investigation or wait for the  license. The construction phase is                                                               
about  9 to  10 years,  but power  generation should  start at  8                                                               
MR. THAYER said  it is up to the governor  and the legislature to                                                               
determine the next steps for  the project. If it is greenlighted,                                                               
determining  the licensing  status  would be  the  next step.  It                                                               
would be  necessary to update  the cost estimates of  the license                                                               
as well  as the  benefit-cost and  economic impact  analyses. The                                                               
data would  then be  reviewed to assure  it reflects  the current                                                               
conditions. There  will also be ongoing  consultations with FERC,                                                               
the landowners, and other stakeholders.                                                                                         
4:00:33 PM                                                                                                                    
CHAIR BISHOP asked  what the estimated price per  kilowatt was in                                                               
MR.  THAYER answered  that it  was $0.0600  to $0.0650.  He noted                                                               
that  Bradley Lake,  which is  the state's  largest hydroelectric                                                               
project, is  about $0.0400 to  $0.0450 per kilowatt and  the cost                                                               
of natural gas is approximately  $0.0800 to $0.0850 per kilowatt.                                                               
The Susitna-Watana Project  fits between the cost  of natural gas                                                               
and current hydro prices on the Railbelt.                                                                                       
SENATOR  SHOWER asked  if the  kilowatt  cost takes  transmission                                                               
lines into account.                                                                                                             
MR.  THAYER answered  no; the  cost  is strictly  to produce  the                                                               
power. The average transmission cost on the Railbelt is $0.2000.                                                                
4:02:09 PM                                                                                                                    
SENATOR  MICCICHE  asked if  the  reservoir  would flood  private                                                               
MR.  CAREY  replied approximately  95  percent  of the  basin  is                                                               
Native corporation land with some  federal land; he was not aware                                                               
of private inholdings.                                                                                                          
MR.  THAYER added  that AEA  will  provide the  committee with  a                                                               
breakdown of  land ownership for  the proposed project  because a                                                               
lot of  the land that would  be flooded belongs to  the Bureau of                                                               
Land Management (BLM).                                                                                                          
SENATOR MICCICHE  noted that  the first  studies for  the project                                                               
were  federal, which  was the  reason  for his  interest in  land                                                               
ownership. He asked if AEA was  two-thirds of the way through the                                                               
preapplication phase.                                                                                                           
MR. THAYER answered yes.                                                                                                        
SENATOR  MICCICHE commented  that the  project is  essentially on                                                               
hold unless the  governor and legislature give  the greenlight to                                                               
move forward.                                                                                                                   
MR. THAYER answered that is correct.                                                                                            
4:03:53 PM                                                                                                                    
At ease.                                                                                                                        
^PRESENTATION: Ambler Mining District Industrial Access Project                                                                 
 PRESENTATION: Ambler Mining District Industrial Access Project                                                             
4:04:35 PM                                                                                                                    
CHAIR  BISHOP  reconvened  the meeting  and  announced  that  the                                                               
committee would  hear an update  on the Ambler Road  project from                                                               
the Alaska Industrial Development and Export Authority (AIDEA).                                                                 
4:04:43 PM                                                                                                                    
TOM  BOUTIN, Executive  Director,  Alaska Industrial  Development                                                               
and Export  Authority, Anchorage, Alaska, stated  that the Ambler                                                               
Road Project  is a 200  mile, 50-foot wide,  50-year right-of-way                                                               
road.  It  is  one  of  the  large  projects  that  the  previous                                                               
administration halted  and Governor  Dunleavy restarted.  He said                                                               
this project  would bring economic  development to a  region that                                                               
has very little.                                                                                                                
4:05:57 PM                                                                                                                    
MR. BOUTIN  related that when  he was  first on the  board, AIDEA                                                               
financed,  and still  retains ownership  of, the  DeLong Mountain                                                               
Transportation Project (DMTP)  road to the Red Dog  Mine. He said                                                               
the Northwest  Arctic Borough received  $22 million from  the Red                                                               
Dog in  FY 2018 and he  believes that the Ambler  project has the                                                               
immediate potential to  be equivalent to four Red Dogs  and 12 or                                                               
13 Red  Dogs in later  years. He said  the financing for  Red Dog                                                               
was  public  finance  for natural  resource  development  and  he                                                               
believes  that the  Ambler project  would benefit  from the  same                                                               
model,  with the  debt service  paid with  tolls. Hopefully,  the                                                               
current interest rates  will persist, but in any  event, AIDEA is                                                               
ready to do the first bond issue.                                                                                               
4:08:10 PM                                                                                                                    
MR. BOUTIN displayed  a map of the Ambler area  and detailed that                                                               
the project  starts at mile 161  of the Dalton Highway  and heads                                                               
west for 211 miles. The  road crosses state, federal, and private                                                               
land. It  also crosses a  national park which is  allowed because                                                               
of   a  provision   in  the   Alaska   National  Interest   lands                                                               
Conservation  Act (ANILCA).  He acknowledged  that this  could be                                                               
CHAIR BISHOP  asked about stakeholder engagement  with the tribes                                                               
and if the alternate route is still a viable option.                                                                            
MR.  BOUTIN  answered  that the  Environmental  Impact  Statement                                                               
(EIS) is  due on March 5,  2020 and the Record  of Decision (ROD)                                                               
will be 30  days later. The ROD will include  the U.S. Army Corps                                                               
of Engineers permit under Section 404  of the Clean Water Act. He                                                               
added that AIDEA hired the Bureau  of Land Management (BLM) to do                                                               
the EIS and paid for consultant expenses.                                                                                       
MR. BOUTIN detailed that there  were 21 stakeholder hearings that                                                               
ranged  from  two  participants  up to  96  participants  at  the                                                               
Fairbanks  hearing. Each  hearing  averaged  29 participants.  He                                                               
said public participation at the  hearings was like a large state                                                               
timber sale without rancor or  picketing. AIDEA has addressed and                                                               
will continue to address concerns  expressed during the hearings.                                                               
Concerns  included subsistence  values, lifestyle  changes, jobs,                                                               
and  cost of  living  in rural  areas.  Many participants  talked                                                               
about the  Red Dog Mine and  the desire to bring  similar jobs to                                                               
the Ambler region.                                                                                                              
4:13:26 PM                                                                                                                    
SENATOR  SHOWER   commented  that   people  involved   in  mining                                                               
operations like  the Red Dog typically  fly in and out.  He asked                                                               
if AIDEA  has planned for  air travel  due to the  traffic impact                                                               
generated by the project.                                                                                                       
MR. BOUTIN  replied there is  a provision  for a small  number of                                                               
airports, but  materials will  primarily be moved  in and  out by                                                               
SENATOR SHOWER emphasized the importance  of developing a plan to                                                               
handle a significant increase in air traffic.                                                                                   
4:15:12 PM                                                                                                                    
SENATOR  MICCICHE   asked  which  agencies  are   evaluating  and                                                               
participating in the EIS process.                                                                                               
MR. BOUTIN  answered that  state and  federal agencies  have been                                                               
involved. Federal  agencies include  the U.S. Park  Service, U.S.                                                               
Army Corps  of Engineers, and BLM.  AIDEA has funded work  by the                                                               
Alaska Department of Natural Resources  and communicated with the                                                               
Alaska  Department of  Fish and  Game. The  Alaska Department  of                                                               
Transportation  and   Public  Facilities  (DOTPF)   received  the                                                               
original funding  and oversight responsibilities for  the project                                                               
and AIDEA took over the project a few years ago.                                                                                
SENATOR MICCICHE  asked him  to share  the exhaustive  aspects of                                                               
the  National  Environmental  Policy   Act  (NEPA)  EIS  process,                                                               
specifically  the  impacts  and infrastructure  needs  associated                                                               
with Section 404 of the Clean Water Act.                                                                                        
MR. BOUTIN replied the EIS is  for a 211-mile road with a 50-foot                                                               
right-of-way and  Section 404 for  water quality will be  part of                                                               
the ROD.  The EIS does  not treat  the mining impacts;  each mine                                                               
will require permitting.                                                                                                        
4:17:27 PM                                                                                                                    
CHAIR BISHOP  asked him to provide  a chart of all  the state and                                                               
federal agencies that are involved  with building the road, which                                                               
crosses park,  state, federal, and shareholder  lands. He pointed                                                               
out that to build  a road now, DOTPF has to  permit with 60 state                                                               
and federal  agencies before construction begins  and the process                                                               
takes over six years.                                                                                                           
MR. BOUTIN agreed to provide the list.                                                                                          
SENATOR SHOWER asked if DOTPF  could provide an assessment of the                                                               
project. He said  he mentioned airport sites  earlier because the                                                               
state may be on the hook  for maintaining the airports and he did                                                               
not see that mentioned.                                                                                                         
MR. BOUTIN  said he would  provide the information, but  the road                                                               
and any associated airports will be private.                                                                                    
4:19:23 PM                                                                                                                    
MR. BOUTIN  directed attention  to the map  of the  Ambler mining                                                               
district on  slide 5. He  noted that the actual  mineral district                                                               
is about the size of the  state of Delaware. He detailed that the                                                               
solid line on  the map shows the area that  Trilogy and NANA have                                                               
agreed to  develop. The  shaded area is  NANA property.  The gray                                                               
area  is  NANA land  that  the  corporation  has options  on  for                                                               
royalties and ownership.                                                                                                        
He  explained that  the  4 stars  on the  map  identify the  most                                                               
advanced of the  12 or 13 projects that have  been identified. He                                                               
pointed out that  Alaska currently has five  operating mines, and                                                               
the initial Ambler mines would double that number.                                                                              
MR. BOUTIN directed attention to the  chart on slide 6 that shows                                                               
the potential resource values identified  in the Arctic, Bornite,                                                               
Sun, and Smucker  mines. He noted that many of  the minerals that                                                               
have been identified  are currently in demand.  These are copper,                                                               
cobalt, zinc, lead, gold, and silver.                                                                                           
4:21:00 PM                                                                                                                    
MR.  BOUTIN  said  Trilogy  and   South  32  made  joint  venture                                                               
announcements, starting  in December  2019. South  32 is  a major                                                               
mining investment  company with $10  billion in net  assets. This                                                               
project is  starting out  many magnitudes  stronger than  the Red                                                               
Dog Mine  when AIDEA provided  financed. By contrast,  capital is                                                               
more  readily available  today and  the Ambler  district is  more                                                               
SENATOR MICCICHE  commented that  the Red  Dog Mine  delivers its                                                               
product through Norton Sound.                                                                                                   
MR.  BOUTIN  explained  that  the  Red  Dog  Mine  lighters  zinc                                                               
concentrate to transport ships for Asian and Canadian customers.                                                                
SENATOR MICCICHE remarked that someone  determined that there was                                                               
no feasible way  to move Ambler Mining District  product west for                                                               
a  shorter distance  to  a  marine terminal  versus  east to  the                                                               
Dalton Highway.                                                                                                                 
MR. BOUTIN  said the  plan is  to ship the  ore to  Fairbanks for                                                               
rail transport to the Port of Anchorage.                                                                                        
4:23:31 PM                                                                                                                    
MR. BOUTIN  turned to slide 8  that shows the number  of jobs and                                                               
income  that can  be expected  from the  four mines.  He restated                                                               
that the Red Dog Mine paid  $22 million in taxes to the Northwest                                                               
Arctic Borough  in 2018, and  noted that a comparable  payment in                                                               
lieu of taxes (PILT) for the  four mines would bring an estimated                                                               
$118 million a year.                                                                                                            
MR. BOUTIN  reviewed the following  points of an  industrial road                                                               
as it applies to the Ambler road, which will be private.                                                                        
   • Ambler Access is designed to be a controlled road with                                                                     
     limited environmental and wildlife impacts.                                                                                
   • It draws on AIDEA's experience with DMTS, the road and port                                                                
     that support the Red Dog Mine.                                                                                             
   • The Ambler Road will use protocols similar to the DMTS with                                                                
     trained drivers, radio communications, and instructions                                                                    
     that traffic stops when wildlife are spotted.                                                                              
   • AIDEA plans to establish a Subsistence Advisory Committee                                                                  
     similar to that used at Red Dog Mine so that traditional                                                                   
     and local knowledge is used during the construction and                                                                    
     operation of the road.                                                                                                     
   • AIDEA also plans to provide other community benefits,                                                                      
     comparable to DMTS Village Fuel Transfer program.                                                                          
4:26:03 PM                                                                                                                    
SENATOR HOFFMAN inquired as to the length of the DMTS road.                                                                     
CHAIR BISHOP answered that it is 57 miles.                                                                                      
MR. BOUTIN displayed  slide 10 that shows caribou on  the road to                                                               
the Red Dog  Mine and acknowledged that  people expressed concern                                                               
about this.  He maintained  that the Red  Dog Mine  is compatible                                                               
with caribou  and that there  was no  reason to believe  that the                                                               
Ambler  Road would  be any  different.  He pointed  out that  the                                                               
draft  EIS  states that  the  Ambler  Access Project  would  only                                                               
affect  0.0050  percent  of the  Western  Arctic  caribou  herd's                                                               
natural range.                                                                                                                  
MR. BOUTIN  turned to slide 11,  Not the Same as  the Dalton, and                                                               
stated that  the Ambler  Road crosses the  land of  six different                                                               
landowners including  the state, the federal  government, and two                                                               
regional corporations.                                                                                                          
4:28:13 PM                                                                                                                    
CHAIR BISHOP asked  if the designation "others  to be determined"                                                               
refers to private in-holders.                                                                                                   
MR. BOUTIN  answered that there  are some private  in-holders but                                                               
the Ambler  Road does not  cross that  land. It does  cross major                                                               
amounts of  Native corporation  land and  AIDEA has  been talking                                                               
with those landowners from the beginning.                                                                                       
MR. BOUTIN highlighted that the  enabling statutes for AIDEA talk                                                               
exclusively  about  jobs  and   economic  development.  They  say                                                               
nothing  about return  on investment,  prudent investor  rule, or                                                               
return on  capital. He said  revenue bonds are available  for the                                                               
Ambler Road  Project and  the capital  markets would  avidly seek                                                               
the bonds if  AIDEA was ready to  go to market. The  hope is that                                                               
the capital markets  are similarly favorable when  the project is                                                               
ready for financing.                                                                                                            
He  emphasized that  the  public financing  for  the Ambler  Road                                                               
Project will  not use state money.  It will be supported  by toll                                                               
revenues from  some form of  "take or  pay" bonds so  the mineral                                                               
development  will entirely  support the  project. However,  AIDEA                                                               
reserves  the option  to look  at its  general obligation,  as it                                                               
often has used  in financing, if that type of  credit backstop is                                                               
cost effective.  Decisions on financing  will be made at  a later                                                               
date and  will be  viewed in  the context  of capital  markets at                                                               
that time.                                                                                                                      
4:30:28 PM                                                                                                                    
MR. BOUTIN displayed  a chart of the 9 stages  of the Ambler Road                                                               
Project. He said stages 1-2  used funds initially appropriated by                                                               
the legislature  to DOTPF and  subsequently to AIDEA.  In October                                                               
2019, the AIDEA  board approved spending $718,000  of its capital                                                               
to fund the  project through the record of  decision (ROD). AIDEA                                                               
will use  its own resources  after the  ROD to work  with private                                                               
investors for  the frontend development,  design, and  the right-                                                               
of-way (ROW) acquisition across the parcels of private land.                                                                    
MR. BOUTIN  stated that  the AIDEA  board has  talked extensively                                                               
with  mining companies  who  will  pay 50  percent  of the  costs                                                               
through  stages 4-6.  He said  stage 7  assumes a  certain design                                                               
success and at this point is a best guess.                                                                                      
He  referenced  his  background  and  noted  his  involvement  in                                                               
designing and building roads through  the Tongass National Forest                                                               
for the  Ketchikan Pulp Company.  He said construction  costs per                                                               
mile  for a  road  in  the Ambler  Mining  District  would be  an                                                               
eightfold increase.                                                                                                             
MR. BOUTIN pointed out that  natural resources are what the state                                                               
has and the cost of  extracting those natural resources have gone                                                               
up faster than the rate  of inflation. He maintained that natural                                                               
resource  extraction  is   realistically  where  the  year-round,                                                               
family-wage  jobs are  going to  be.  The cost  of extraction  is                                                               
high, but  the state provides  a stable and  reliable environment                                                               
compared  to  other countries.  When  people  take  a risk  on  a                                                               
resource in Alaska, they know the bandwidth of that risk.                                                                       
4:35:01 PM                                                                                                                    
CHAIR BISHOP  asked if  the mining companies  would pay  for road                                                               
operation and maintenance (O&M).                                                                                                
MR. BOUTIN answered yes. He noted  that the Red Dog Mine pays for                                                               
road operation and maintenance.                                                                                                 
SENATOR MICCICHE said  he supports mining and the  concept of the                                                               
project. However,  understanding the structure in  the details is                                                               
imperative for his  support. He pointed out  that the legislature                                                               
passed a bill called The Cook  Inlet Recovery Act where the state                                                               
paid more  for the credits  than the hydrocarbons created  by the                                                               
Act. He said he does not  mean to compare the Ambler Road Project                                                               
to The Cook  Inlet Recovery Act, but the people  of Alaska should                                                               
know  the  risk and  reward  balance  for  the project.  He  said                                                               
whatever  AIDEA  can  provide the  committee  on  the  commercial                                                               
structure for the project would be very helpful moving forward.                                                                 
4:37:21 PM                                                                                                                    
MR. BOUTIN agreed  to provide the requested  information. He said                                                               
it is useful  to look at the  risk and return to  the borough and                                                               
the state from  the Red Dog Mine from inception  to today because                                                               
the Ambler Road Project is similar but much larger.                                                                             
SENATOR SHOWER  asked if there is  a plan for the  rural villages                                                               
near the Ambler Road to have access to the road.                                                                                
MR. BOUTIN  replied AIDEA  has a table  that shows  distances for                                                               
all  villages  near  the  Ambler  Road  Project.  He  noted  that                                                               
villages  near  Red Dog  are  able  to  have gasoline  and  other                                                               
resources dropped  off and that  has reduced gasoline  prices for                                                               
villages near  that road by approximately  two-thirds. The Ambler                                                               
Road Project will have similar  usage available as well as access                                                               
by public  safety and emergency  vehicles. He said the  degree to                                                               
which  access would  be available  to a  community is  yet to  be                                                               
determined. The Ambler  Road is private, but  the stakeholders in                                                               
the area  have every  right to  have an  improvement in  jobs and                                                               
lifestyle if that is want they want.                                                                                            
4:39:32 PM                                                                                                                    
SENATOR SHOWER related that he  recently attended a briefing that                                                               
discussed what  countries might have resources  locked up. China,                                                               
for example, holds 96 percent of  the rare earth metals and it is                                                               
not necessarily  friendly to  the U.S. He  posited that  the U.S.                                                               
should consider  the long-term  value of  rare earth  metals, the                                                               
lawless nature and tensions around  the world, and the ability to                                                               
move  forward  on  mining  projects  that  provide  the  critical                                                               
resources required  for everyday living.  He said, "If we  do not                                                               
grow it,  we mine it,  and I think we  often are afraid  to build                                                               
anything   anymore."  He   emphasized  that   responsible  mining                                                               
requires risk  mitigation not just  for economic impacts  but for                                                               
national security and  other things. Mining is the  kind of thing                                                               
that Alaska contributes for the state and the country.                                                                          
MR. BOUTIN replied  Governor Dunleavy is most  attuned to natural                                                               
resource development.  He follows mining projects  throughout the                                                               
state  and believes  that  jobs and  increasing  the gross  state                                                               
product are going to come from mining projects.                                                                                 
4:41:54 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair Bishop adjourned the Senate  Community and Regional Affairs                                                               
Standing Committee meeting at 4:41 p.m.                                                                                         

Document Name Date/Time Subjects
AIDEA Ambler Road Project Update.pdf SCRA 2/11/2020 3:30:00 PM
Ambler Road
AEA Susitna-Watana Presentation 2-11-20.pdf SCRA 2/11/2020 3:30:00 PM