Legislature(2009 - 2010)SENATE FINANCE 532
02/25/2009 03:00 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Mining | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE RESOURCES STANDING COMMITTEE
SENATE RESOURCES STANDING COMMITTEE
February 25, 2009
3:06 p.m.
MEMBERS PRESENT
HOUSE RESOURCES
Representative Craig Johnson, Co-Chair
Representative Mark Neuman, Co-Chair
Representative Bryce Edgmon
Representative Paul Seaton
Representative Peggy Wilson
Representative Scott Kawasaki
Representative Chris Tuck
SENATE RESOURCES
Senator Lesil McGuire, Co-Chair
Senator Bill Wielechowski, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Hollis French
Senator Bert Stedman
Senator Gary Stevens
Senator Thomas Wagoner
MEMBERS ABSENT
HOUSE RESOURCES
Representative Kurt Olson
Representative David Guttenberg
SENATE RESOURCES
All members present
COMMITTEE CALENDAR
PRESENTATION: ALASKA MINING
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to report
WITNESS REGISTER
JIM CALVIN, Partner
McDowell Group
Juneau, Alaska
POSITION STATEMENT: Presented information on the economic
benefits of Alaska's mining industry.
STEVEN BORELL, PE, Executive Director
Alaska Miners Association, Inc.
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of Alaska's major
mines and projects.
KARL HANNEMAN, Director
Corporate Affairs
Teck Cominco Alaska Inc.
Anchorage, Alaska
POSITION STATEMENT: Answered a question in regard to royalty
payments by the Red Dog Mine.
ACTION NARRATIVE
3:06:16 PM
CO-CHAIR LESIL MCGUIRE called the joint meeting of the House and
Senate Resources Standing Committees to order at 2:50 p.m.
Representatives Johnson, Neuman, Wilson, Tuck, Kawasaki, Edgmon,
and Seaton and Senators McGuire, Wielechowski, Wagoner, Huggins,
Stedman, and French were present at the call to order. Senator
Stevens arrived as the meeting was in progress.
^PRESENTATION: ALASKA MINING
3:07:21 PM
CO-CHAIR MCGUIRE announced that the only order of business would
be a presentation on mining in Alaska.
JIM CALVIN, Partner, McDowell Group, gave a PowerPoint
presentation on the economic benefits of Alaska's Mining
Industry. He said his firm has tracked the industry for four or
five years now. An assessment of the economic benefits of the
mining industry to the state was prepared in 2005, and since
then McDowell Group has been tracking some key indicators and
publishing the results in a brochure. He said his presentation
today will update the committee on his company's latest efforts
in this regard.
3:09:11 PM
MR. CALVIN noted that between 2007 and 2008 there has been no
significant change in overall employment in the mining industry
[slide 4, page 2]. Mining provides about 3,500 direct jobs from
all aspects of the industry, including hard rock, coal,
exploration, development, and industrial minerals like rock,
sand, and gravel. There are about 5,500 total jobs in Alaska
that are linked in some way with the mining industry, including
indirect and induced jobs. The total payroll is up a bit from
2007, he continued. Data through the first three quarters of
2008 suggests a $350 million total payroll for direct, indirect,
and induced jobs. The $82,600 average industry wage is notable
because it is about 90 percent higher than the average wage in
the Alaska economy and second only to the oil and gas industry.
MR. CALVIN said there is a broad geographic diversity of the
economic benefits of the mining industry [slide 5, page 3].
One-hundred-twenty communities, stretching from Metlakatla to
Barrow, have one or more residents employed in the mining
industry. Mining projects often occur in very remote rural
areas and this provides employment opportunities to the folks in
the nearby communities. For example, the Donlin Creek Project
draws people from 25-30 different nearby communities; these
mining jobs are some of the few, if not the only, year-round
private sector jobs available in many of those communities.
3:12:26 PM
MR. CALVIN explained that not all mines are created equal as far
as the capacity to generate revenue for state government [slide
6, page 3]. All operating mines are subject to a mining license
tax and all mines are subject to a corporate income tax. Most
mines pay something to local governments, whether it is a
payment in lieu of taxes or property or sales taxes. Only those
mines that are located on state land are subject to state
royalty payments. For example, the Kensington Mine near Juneau
does not make royalty payments to the state, but it pays a
mining license tax, a corporate income tax, and Juneau property
taxes.
MR. CALVIN pointed out that state and local government revenues
have gone down over the past few years [slide 7, page 4]. The
$71 million in corporate income tax in 2006 dropped to $61 in
2007 and an estimated $50 million in 2008. The mining license
tax was $79 million in 2006, $54 million in 2007, and an
estimated $45 million in 2008. Royalty payments are a smaller
part of the pie but have been more stable at about $7.5 million
in 2006, $10 million in 2007, and an estimated $10 million in
2008. Local tax revenue has been stable at about $14-$16
million over the three-year period. The total state and local
government revenue was $172 million in 2006 and this has trended
down to an estimated $121 million in 2008. This trend is
expected to continue at least into 2009, he added.
3:15:01 PM
MR. CALVIN specified that of the total $15.6 million paid in tax
revenue to local governments in 2008, the largest was the Red
Dog Mine's payment in lieu of taxes to the Northwest Arctic
Borough [$11 million, slide 8, page 4]. This payment accounted
for about 75 percent of all general fund revenues for the
Northwest Arctic Borough. Fort Knox Mine near Fairbanks is that
area's single largest property tax payer at $2.8 million in
2008. The Greens Creek Mine is Juneau's single largest property
tax payer [at $1.3 million]. Once on line, the Kensington Mine
may supplant Greens Creek, he said. The City of Delta Junction,
Denali Borough, City of Nome, and others have also received
payments, so mines provide substantial benefits to the local
communities near where they occur. He further noted that this
tax revenue does not include the revenue that is generated from
property taxes on businesses that provide goods and services to
the mining industry or the property taxes paid by mining
industry employees.
MR. CALVIN discussed the benefits provided by the mining
industry to three quasi-state government organizations [slide 9,
page 5]. The Alaska Railroad Corporation received $18.5 million
in revenue for moving coal, sand, and gravel. This revenue
creates significant economies of scale for the railroad that
might otherwise mean higher costs for other users of the
railroad. The Alaska Industrial Development and Export
Authority (AIDEA) took in $22 million for use of the state-owned
facilities at the Skagway Ore Terminal and at the Delong
Transportation System which supports the Red Dog Mine. The
Alaska Mental Health Trust received $1.6 million in rents,
royalty payments, and material sales.
3:17:40 PM
MR. CALVIN touched on the benefits of mining to rural and Native
residents [slide 10, page 5]. The Red Dog Mine paid royalties
of $212 million to the NANA Regional Corporation ("NANA") in
2008. As required by provisions in the Alaska Native Claims
Settlement Act (ANCSA), about 70 percent of those revenues [$122
million in 2008] are re-distributed to all of the other regional
corporations in Alaska. In turn, these corporations distribute
the money to village corporations. This is an example of a very
remote mine in northwest Alaska that pushes money to virtually
every corner of the state's economy. He cautioned, however,
that over the past two years the price of zinc has declined from
$2 to $.50 per pound, so the royalties are expected to decline
in the near time. Another benefit to rural Alaska is the
employment from mining. At the Red Dog Mine, [56 percent] of
the 485 jobs are held by NANA shareholders and 86 percent of the
[210] jobs at the Donlin Creek Mine are held by Calista
shareholders.
3:19:23 PM
REPRESENTATIVE SEATON asked whether the [$212 million] is the
gross amount of royalty paid by the Red Dog Mine or the net
after subtraction of monies that were advanced from previous
years. He referenced a previous 4 percent net smelter royalty.
MR. CALVIN responded that the check written to NANA was for $212
million. He said he does not have with him the specifics about
the royalty provision, but he understands that most of the
original capital expenditures are paid off; so, essentially,
this is the net royalty that flows to NANA.
3:21:04 PM
STEVEN BORELL, PE, Executive Director, Alaska Miners
Association, Inc., continued the PowerPoint presentation. He
estimated that approximately 175 small, family placer mines will
be operating in Alaska in 2009, about the same number as in 2008
[slide 12, page 6]. In addition, there are various other placer
mines with permits in hand. Production will be about 54,000
ounces [of gold].
MR. BORELL said five large mines are currently operating in
Alaska [slide 13, page 7]. In comparison, Nevada, which is one-
fourth the size of Alaska, has 55 large mines. The Usibelli
Coal Mine, Inc. is the oldest of the large mines [slides 14-15,
pages 7-8], he continued. It has 110 employees and 100 percent
Alaska hire. It produces about 1.5 million tons of coal per
year, of which 1 million tons goes to the Interior for power
plants and heating and 500,000 tons goes to Pacific Rim
destinations. In the last couple of years there have been
several shipments to Chile. Currently, Usibelli has 470 million
tons of coal under permit. He referred to a photo and diagrams
of the Usibelli Mine on slide 16, page 8, and described how
mining of the coal is done.
3:25:44 PM
MR. BORELL noted that the serious challenge of today is that
metal prices are down to levels last seen five years ago, yet
costs are much higher than five years ago [slide 17, page 9].
Some companies are still burning the diesel fuel purchased at
last summer's peak prices.
MR. BORELL displayed a photograph of the Greens Creek Mine
[slide 18, page 9] and pointed out the locations of the portal,
mill, power plant, dry facility, change house, offices, and
underground mine. The mine has 320 employees after 5 layoffs
and 79 percent of the employees live in Alaska, he said. Zinc
revenues from the Greens Creek Mine are often equal too or
higher than the silver revenues. So, given the decline in zinc
prices, very serious belt tightening is taking place at this
mine. For example, employees are now being used to do work that
was once done by contractors. Green's Creek is the largest
[private] employer and taxpayer in the City and Borough of
Juneau. He reviewed an isometric diagram of the Green's Creek
Mine as well as a photograph of the ship loading facilities
[slides 19-20, page 10].
3:28:54 PM
MR. BORELL drew attention to a photograph of the Red Dog Mine
area [slide 21, page 11]. He pointed out the air strip on the
right side of the photo and the tailings impoundment in the
middle foreground. A [supplemental] environmental impact
statement (SEIS) is underway for the Red Dog Mine [slide 22,
page 11], he said. The public comment period for the SEIS is
over and the Environmental Protection Agency (EPA) is now in the
process of evaluating those comments [the final EIS is due
summer 2009]. He noted that the main pit area at Red Dog has
been mined since 1989 when the operation began. The line down
the middle of the photograph is a covered diversion ditch or
culvert, he explained. The SEIS is focused on the Aqqaluk
Deposit which will be mined over the next 20 years once the
permit is in place. He pointed out the ore storage buildings in
a photograph of the Delong Mountain Transportation System that
serves the mining district which includes the Red Dog Mine
[slide 23, page 24].
3:30:55 PM
MR. BORELL reiterated that the Red Dog Mine has 485 employees
and full time contractors [slide 24, page 12]. He said $110
million was expended to NANA joint venture companies that had
contracts because of the Red Dog Mine. Thus far, the mine has
spent $10.8 million searching for a natural gas source; the
search will continue this year, but there will not be any major
drilling. The mine has paid $22.5 million to AIDEA for use of
the Delong Mountain Transportation System. Production in 2008
was down about 10 percent from the previous year, he continued,
and payments to the Northwest Arctic Borough were down. While
the actual amount is still pending, taxes to the state will also
be down significantly for 2008. He pointed out that the metals
for the 2010 Winter Olympics have been provided by Tech Cominco
Alaska [owner of the Red Dog Mine, slide 25, page 26].
3:32:06 PM
MR. BORELL reviewed gold and silver prices for the past 10 years
[slide 26, page 13]. Gold is currently approaching $1,000 per
ounce, he said, but had the same inflation rate of the early
1980s taken place when gold was in the $900 range, the price
would be over $2000 today. Silver prices have done better than
zinc and lead.
MR. BORELL related that the Fort Knox Mine near Fairbanks [owned
by the Kinross Gold Corporation] has 450 employees plus 30 full-
time contractors on site [slide 27, page 14]. Annual wages and
benefits [are $38 million], electricity is [$28 million per
year], and $15 million is expended per year for fuel. He
pointed out that over 1.8 million hours have been worked at Fort
Knox without a loss-time accident [slide 28, page 14]. This is
an incredible accomplishment and something a company takes great
pride in, he stressed. Approximately 330,000 ounces [of gold]
will be produced in 2009 from this mine [slide 29, page 15]. A
heap leach facility is under construction and ore will be put on
the heap leach beginning in October 2009. Phase 7 of the pit
expansion began in October 2008 and exploration will continue to
determine the potential for a Phase [8]. The Phase 7 expansion
and the heap leach will extend the life of the mine to 2014, but
he said he is optimistic that it will go beyond that.
MR. BORELL said the Pogo Mine is an underground gold mine
northeast of Delta Junction [slide 30, page 15]. The year 2008
marked a year of safety improvements over 2007, production
increased from 260,000 ounces to 347,000 ounces, employee
turnover was significantly improved, and direct jobs increased
from 250 to 297 [slide 31, page 16]. The multi-million dollar
water treatment plant treats mine water before it is discharged
[slide 32, page 16]. In 2009 the Pogo Mine will focus on
minimizing capital expenditures due to the economic uncertainty,
production will rise slightly to 358,000 ounces, declining fuel
and electricity costs will be a positive, and exploration to
expand the resource will be ongoing.
3:35:58 PM
MR. BORELL discussed the three mines that are currently in "idle
status": Nixon Fork, Rock Creek, and Kensington [slide 33, page
17]. He emphasized that "idle status" is his own term and not a
term used by the companies. Last week, Pacific North West
Capital Corp. purchased the Nixon Fork Mine from St. Andrew
Goldfields Ltd [slide 34, page 17]. A work plan is currently
being developed and production is expected to begin in two
years, he said. The Rock Creek Mine near Nome will provide 135
jobs and an annual payroll of $10.4 million when it is
operating, along with an annual expenditure of $20.6 million for
supplies and services [slide 36, page 18]. A work plan is
currently being developed for 2009. Like many others, the
company was caught by the economic downturn and had to shut down
many things and sell assets. The facilities for the Kensington
Mine near Juneau represent $230 million of investment and are
100 percent complete and ready to go to work [slides 37-39,
pages 19-20], he continued. Attorneys for Coeur Alaska, owner
of Kensington, argued before the U.S. Supreme Court on January
12, 2009, that the mine should be allowed to do its preferred
option for tailings disposal.
3:39:15 PM
MR. BORELL noted that three projects are currently in advanced
exploration and permitting: Chuitna Coal Project by PacRim
Coal, Donlin Creek [by Barrick/NovaGold Joint Venture], and
Pebble Partnership [by NDM/Anglo American Joint Venture] [slide
40, page 20].
MR. BORELL said the Chuitna Coal Project is in the process of
finalizing a supplemental environmental impact statement [slide
41, page 21]. Approximately 15 years ago the company had a
record of decision and permits in hand, but by the time it
received the permit the price of coal had decreased sufficiently
to make the mine uneconomic. The project is now looking at an
investment of over $600 million and 350 full-time jobs for a
design capacity mine of about 12 million metric tons per year.
Infrastructure will include 9-12 miles of road depending on the
routing of the road and coal conveyer. There will be personnel
housing and an airstrip, and there will be a 10,000 foot trestle
out to water deep enough to accommodate a 60-foot draft vessel.
The record of decision is expected this fall.
3:40:55 PM
MR. BORELL advised that 33,500 meters of drilling was completed
at Donlin Creek in 2008 [slides 42-44, pages 21-22] and the mine
continued its advanced project engineering and baseline
environmental studies. The project feasibility study will be
finalized in 2009 and permit applications will be submitted.
Pre-permitting meetings have been held with 35 villages so far
in 2009, and in March the company is scheduled to meet with the
remainder of the 55 villages in this area. In 2008, Donlin
Creek had 138 employees from 26 villages.
3:42:19 PM
MR. BORELL noted that in 2008 John Shively was hired as the CEO
for the Pebble Partnership [slides 45-46, page 23]. Last year
$140 million was spent, more than 800 people were employed, over
200 holes were drilled, and environmental and pre-feasibility
work was conducted. He pointed out that the partners in the
Pebble project are involved in base metals around the world and
right now base metal prices are very low, so the 2009 budget has
not yet been set. Some drilling is expected in 2009 and work
will continue on pre-feasibility and environmental baseline
studies. Major challenges for this project include a source of
power, roads, ports, mill, the permit process, workforce
development, commodity prices, and project economics.
3:44:05 PM
MR. BORELL specified that in 2008, 30 projects spent over $1
million each on grassroots or early stage exploration. Some of
this could have been the same company at two or three locations,
he added. Fewer projects are expected in 2009, but right now
the exact number is not known. The focus in 2009 will be on
gold because base metal exploration projects will have a very
difficult time getting funding.
MR. BORELL discussed three projects that are currently in early
stage exploration: the Money Knob Project, the Niblack Project,
and the Lucky Shot Project. Drilling at Money Knob near
Livengood, a project by International Tower Hill, is being
conducted during the winter because the area is otherwise too
wet to drill without damage [slide 48, page 24]. Phase I and II
drilling were completed in 2008, Phase III drilling is occurring
this winter, and Phase IV drilling in the upland areas will also
occur in 2009. An expenditure of $8.5 million is expected in
2009 as compared to $8 million in 2008. There will be 45
employees in 2009 as compared to 42 in 2008. International
Tower Hill expects to spend another $1.5 million in 2009 on
other projects around the state.
3:46:31 PM
MR. BORELL said the Niblack Project in Southeast Alaska near
Ketchikan is primarily for base metals so it will be a difficult
project [slides 49-50, page 25]. An underground adit was
completed in 2008, as was the Phase I drilling. The project is
currently on care and maintenance, but a 2009 budget of $3.6
million is expected. There will be 7,500 meters of drilling
this year and environmental impact studies will continue.
MR. BORELL reported that in 2008 Full Metal Minerals had 11
project areas, 5 drill programs, and spent $21 million. Due to
the crash in base metal prices, the Forty Mile project will not
be a focus in 2009 like it was in 2008. However, the company
does expect to work at Lucky Shot in 2009 and is in the process
of permitting this historic mine. This project is located west
of Hatcher Pass on Willow Creek. A 10,000 ton bulk sample will
be undertaken with a budget of $7.5 million and 25-40 workers.
The mill in place is from over 20 years ago and is where the
bulk sample will be processed.
3:49:41 PM
KARL HANNEMAN, Director, Corporate Affairs, Teck Cominco Alaska
Inc., addressed Representative Seaton's earlier question about
royalties. He explained that after the original discovery in
the late 1970s, the Red Dog ore body was drilled off and
subsequently identified as the number one zinc deposit in the
world, both in grade and total size. Through the ANCSA process,
NANA selected that land and then negotiated a partnership
agreement with Cominco Alaska. Cominco Alaska later merged with
Teck and Teck Cominco Alaska is now known as Teck. So, he
continued, this is a very different circumstance than what is
normally the case in terms of royalty structure. The provision
for a net smelter return royalty is now a very substantive 25
percent net profits interest royalty to NANA. This was
negotiated early-on, but after the ore body had been fully
identified.
MR. HANNEMAN related that the numbers presented by the McDowell
group are year-end estimates and do reflect the 2008 recoupment
of the prior advanced royalties and the conversion to the net
profits interest. The structure of the agreement was such that
it provided for an advanced royalty to NANA during the period of
time where capital was to be recouped, he explained. Production
started in 1989, but the original investment, plus fees and
interest, were not recouped until the fourth quarter of 2007.
So, the numbers do reflect the actual payments made in 2008,
subject to year-end adjustments based on the estimates.
3:52:29 PM
SENATOR HUGGINS said it is good news that Lucky Shot will be
operating in 2009 because both merchants and the people working
there get the benefits. He asked whether Mr. Borell had a
projection for maturation and production at the Lucky Shot.
MR. BORELL said it is his sense that the bulk sample will tell
whether changes to the mill process are needed. The sampling
also allows the time to continue the permitting, but he said he
does not know whether the permits will be in place for 2010.
The company will move as fast as it can if everything is
positive with the bulk sample. Whether that can happen in 2010
is unknown because the uncertainties of permitting a project are
huge, especially given that someone could challenge it legally.
3:54:35 PM
SENATOR HUGGINS inquired whether he is correct in believing that
now may not be the right time to get into the mining business,
given stock prices for mining organizations, commodity prices,
operating costs, and so forth.
MR. BORELL agreed that mining is one tough business, but said he
does not think it is a bad time to get into mining because the
opportunities in Alaska are tremendous and the overall, long-
term demand for metals is there. People in India, China, and
other third-world-like areas are starting to have extra money
and becoming able to improve their lifestyle with things like
running water, which means copper pipes or electrical energy.
In addition, these people are also using their extra money to
buy gold for protection against the future.
3:57:31 PM
MR. BORELL, in response to Senator Stedman, said he is unsure
whether there will be a drilling program at a potential mine
site on Woewodski Island northwest of Wrangell, although that is
the hope. He said the trees on the island are small because of
the mineralization under them. Olympic Resource Group has been
exploring the island for many years and recently issued a lease
to Bravo Ventures. Bravo expects to put a couple of holes in,
but may not be able to do that this year because of the current
economic situation.
MR. BORELL, in response to Representative Seaton, said a work
program is again planned for this summer [for the black sand
ridges on state and federal lands near Yakutat], but he does not
know what the plans are for the longer term. Like other base
metals, iron prices have gone down significantly, so money
cannot be raised through the stock exchanges.
3:59:47 PM
REPRESENTATIVE NEUMAN asked whether there is a way the state
could refinance loans to ensure that mines like Rock Creek do
not shut down.
MR. BORELL clarified that while the Rock Creek Mine has shut
down operations, the property is not for sale to his knowledge;
the assets that are being sold are located elsewhere. Speaking
for himself, not the Alaska Miners Association, he said he does
not think the state should be in the loan business. He offered
his belief that projects need to meet the tests that the
financial community has. However, that is different from an
AIDEA standpoint, he continued. An AIDEA loan turns out to be a
guaranteed loan by the state. The agreement with the property
for the Delong Mountain Transportation System was that [Red Dog
Mine] would continue to make a minimum payment even if the mine
was shut down. At this point the state has benefitted because
more than double the original price of those facilities has been
paid. The Skagway ore facility is currently receiving
concentrates from mines in Canada and that is a great
opportunity for the state through AIDEA.
REPRESENTATIVE NEUMAN suggested getting a report from AIDEA as
to what it is doing to help supplement Alaska's mines.
CO-CHAIR MCGUIRE agreed to follow up in this regard.
4:02:56 PM
MR. BORELL, in response to Senator Huggins, said the three-mile-
long road to Rock Creek Mine is the only road he is aware of
that was built using funds from the Roads to Resources program
established by the previous administration. He related that the
Department of Transportation & Public Facilities has issued a
request as to whether any mines have something specifically in
this regard. In most cases, the mines have developed and paid
for their own infrastructure, such as roads and power plants.
For example, Juneau has the lowest electrical prices in the
state because of the power plant that was built for mining.
SENATOR HUGGINS added that a large mine is like a small town in
that it has a full infrastructure. Mining is often the way to
put people to work in Alaska when nothing else is available.
4:05:41 PM
MR. BORELL, in response to Co-Chair McGuire, said he does not
know what each company has done [in regard to developing
alternative energy sources]. However, he said he does know that
every company is looking hard and the further they are from the
Railbelt the harder they are looking. Donlin Creek has looked
at biomass and wind generation, but he said he does not know
what the conclusions were in that regard. The Red Dog Mine has
spent $10.8 million looking for shale gas (natural gas) to use
as an alternative to bringing in diesel fuel. About 25-30 wind
towers were just completed near Nome. Companies are very
interested in finding alternatives that make economic sense for
cutting their electrical costs.
4:07:54 PM
CO-CHAIR MCGUIRE commented that a mine can often be the impetus
for a lot of things and could possibly end up producing power
for a nearby village. She noted that SB 31 would put in place a
production tax credit for capital investments in alternative
energy projects and this could be used by some of these mines.
MR. BORELL offered his opinion that the "real gorilla" for
helping with the price of energy and electricity is coal. For
example, Usibelli Coal Mine, Inc. has 470 million tons of coal
already under permit, so production could be quadrupled
immediately. The price of coal is by far the most stable
because it is not tied to the price of oil or gas.
4:09:50 PM
MR. BORELL, in response to Co-Chair McGuire, joked that if
people are looking for diamonds they do not talk to anybody
about it. But, yes, he continued, there has been diamond
exploration in Alaska and he believes that over the past 40-50
years about six diamonds have been found in the Circle Mining
District northeast of Fairbanks. So, there is a diamond source
somewhere. The miners who discovered the current diamond mining
area in the Northwest Territories followed the indicator
minerals 300 kilometers across Canada in order to find the
source.
4:11:36 PM
CO-CHAIR MCGUIRE added that diamonds are interesting to think
about for future development because they are a big source of
jobs and economic development in Yellow Knife. She asked why
Canada seems to have a more robust mining industry than does
Alaska.
MR. BORELL said that, in his opinion, the biggest factor of all
is the negative impact of the National Environmental Policy Act
of 1969 (NEPA), a process over which Alaska has no control. The
NEPA process requires that a full EIS be done for all projects
that require a federal permit and environmental assessment on
federal lands and for any project that requires two or more
federal permits, such as a discharge permit and a wetlands
permit. For example, it took three and a half years for the
Pogo Mine to go through the EIS process. The real challenge,
however, is the number of places at which the permitting process
can be blocked by someone who opposes the project. "That is a
curse this country carries on any resource development project,"
he said. It is not just in Alaska, it is everywhere. Legal
challenge can be brought for the most miniscule of reasons and
the Kensington Mine, which has gone all the way to the U.S.
Supreme Court, is a prime example of this.
4:14:47 PM
MR. BORELL, in response to Representative Wilson, noted that
exploration was done [on Zarembo Island] last year using a
backpack drill. While the results were positive, someone with a
lot more money must be found to do additional drilling. He said
he is unaware at this point as to whether there are any plans
for this summer.
MR. BORELL, in response to Representative Seaton, explained that
the Alaska Exploration Incentives Act, passed 12-15 years ago,
requires a company to share its resource and geologic data if it
wishes to receive the program's investment incentive. Under
that program there is a very specific list of requirements that
the company must turn in. In further response, Mr. Borell
explained that until there is a track record of data, any one
data point can be taken out of context; therefore it is clearly
not appropriate to publish the data until the company is ready
to publish it. There are those who would take any limited data
and use it out of context to point out all of the "terrible"
things. He said he would be concerned if a requirement was put
on any industry to share data before the overall picture can be
seen and before the engineering design can be determined for
meeting NEPA requirements.
4:19:59 PM
ADJOURNMENT
There being no further business before the committee, the joint
meeting of the House and Senate Resources Standing Committees
was adjourned at 4:20 p.m.
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