Legislature(2019 - 2020)BUTROVICH 205

02/13/2019 03:30 PM Senate RESOURCES

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03:30:17 PM Start
03:32:33 PM Overview: Ambler Mining District Industrial Access Project
04:46:10 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Ambler Access Project Overview & Update by:
- Mark Davis, AIDEA Chief Infrastructure
Development Officer
- Jeff San Juan, AIDEA Infrastructure Development
Senior Finance Officer
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                       February 13, 2019                                                                                        
                           3:30 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Chris Birch, Chair                                                                                                      
Senator Cathy Giessel                                                                                                           
Senator Lora Reinbold                                                                                                           
Senator Click Bishop                                                                                                            
Senator Scott Kawasaki                                                                                                          
Senator Jesse Kiehl                                                                                                             
MEMBERS ABSENT                                                                                                                
Senator John Coghill, Vice Chair                                                                                                
COMMITTEE CALENDAR                                                                                                            
OVERVIEW: AMBLER MINING DISTRICT INDUSTRIAL ACCESS PROJECT                                                                      
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
MARK DAVIS, Chief Infrastructure Development Officer                                                                            
Alaska Industrial and Export Authority                                                                                          
Anchorage Alaska                                                                                                                
POSITION STATEMENT: Participated in the overview of the Ambler                                                                
Mining District Industrial Access Project.                                                                                      
JEFF SAN JUAN, Infrastructure Development Senior Finance Officer                                                                
Alaska Industrial and Export Authority                                                                                          
Anchorage Alaska                                                                                                                
POSITION STATEMENT: Participated in the overview of the Ambler                                                                
Mining District Industrial Access Project.                                                                                      
RICK VAN NIEUWENHUYSE, President and CEO                                                                                        
Trilogy Metals, Inc.                                                                                                            
Vancouver, British Columbia, Canada                                                                                             
POSITION   STATEMENT:   Answered    questions   regarding   mining                                                            
development in the Ambler Mining District.                                                                                      
ACTION NARRATIVE                                                                                                              
3:30:17 PM                                                                                                                    
CHAIR CHRIS BIRCH called the Senate Resources Standing Committee                                                              
meeting to order at 3:30 p.m. Present at the call to order were                                                                 
Senators Bishop, Reinbold, Kiehl, and Chair Birch.                                                                              
CHAIR BIRCH read the following memoriam statement for the late                                                                  
Jack Coghill:                                                                                                                   
     Alaska   elder  statesman   and   Interior  icon,   Jack                                                                   
     Coghill,  93,  died  Wednesday morning  in  North  Pole.                                                                   
     Coghill's  death was  reported by the  troopers at  9:00                                                                   
     a.m. and the cause of death was not noted.                                                                                 
     Coghill  grew  up  in  a  working-family  mercantile  in                                                                   
     Nenana  with  his  brothers  and  served  in  the  first                                                                   
     territorial  House of Representatives  in 1953.  Coghill                                                                   
     served a  tour of duty during  World War II and  was one                                                                   
     of  two surviving  delegates  with  Vic Fischer  to  the                                                                   
     Alaska  Constitutional  Convention.   He  is  the  third                                                                   
     signature  on the  document  according to  a profile  by                                                                   
     KUOC radio  in Fairbanks.  He also  served as a  senator                                                                   
     in the first  three state legislatures and  was known as                                                                   
     "Mister  Republican"   in  a  body  then   dominated  by                                                                   
     Democrats. Coghill  was a mayor of Nenana  for more than                                                                   
     two decades.  He was  elected lieutenant governor  under                                                                   
     the late Wally  Hickel on the Alaska  Independents Party                                                                   
     in 1990 and served until 1994.                                                                                             
     His son  John, our vice chair  here, is a  state senator                                                                   
     who served as  a majority leader for four  years and now                                                                   
     chairs the  Senate Rules  Committee. Senator Coghill  is                                                                   
     traveling home  to Fairbanks from Juneau  this afternoon                                                                   
     and is  unable to be here.  John also has a  great quote                                                                   
     I  wanted to read,  this is  from Jack's  son John,  our                                                                   
     colleague,  "Dad  was  a  firm   believer  in  utilizing                                                                   
     Alaska's  natural resources  to build  a strong  economy                                                                   
     and  provide good  paying jobs  for Alaska.  He had  the                                                                   
     same passion for Alaska even at age 93."                                                                                   
     I  know  I  will personally  treasure  my  copy  of  the                                                                   
     Alaska  Constitution,  actually   signed  by  Lieutenant                                                                   
     Governor Jack  Coghill. I just would extend  our deepest                                                                   
     thoughts  and prayers  for our  colleague, John  Coghill                                                                   
     and his family on the passage of his father.                                                                               
3:32:33 PM                                                                                                                    
SENATOR GIESSEL joined the committee meeting.                                                                                   
^OVERVIEW: Ambler Mining District Industrial Access Project                                                                     
   OVERVIEW: Ambler Mining District Industrial Access Project                                                               
3:33:14 PM                                                                                                                    
CHAIR BIRCH  announced that  the committee  will hear  an overview                                                              
from  the  Alaska  Industrial  Development  and  Export  Authority                                                              
(AIDEA) on the  "Ambler Mining District Industrial  Access Project                                                              
(AMDIAP)." He noted  that the committee's intent  during the early                                                              
part  of the  legislative  session  is  to focus  on  confirmation                                                              
hearings  and presentations  on industry  and aspects of  Alaska's                                                              
economy that are  vital to the state's future and  "Being open for                                                              
business;" AIDEA is a key to that.                                                                                              
3:33:52 PM                                                                                                                    
SENATOR KAWASAKI joined the committee meeting.                                                                                  
3:34:08 PM                                                                                                                    
MARK  DAVIS,  Chief  Infrastructure  Development  Officer,  Alaska                                                              
Industrial  and  Export Authority,  Anchorage,  Alaska,  explained                                                              
that Mr.  San Juan will start  off the AIDEA presentation  with an                                                              
overview  of  the  project,  then he  will  cover  the  permitting                                                              
process  and  where  AIDEA  is  with  the  National  Environmental                                                              
Policy Act (NEPA) process.                                                                                                      
3:34:23 PM                                                                                                                    
JEFF   SAN  JUAN,   Infrastructure   Development  Senior   Finance                                                              
Officer,  Alaska   Industrial  and  Export   Authority,  Anchorage                                                              
Alaska, reviewed AIDEA's overview agenda as follows:                                                                            
   • AIDEA's role,                                                                                                              
   • DeLong Mountain Transportation System (DMTS) model,                                                                        
   • AMDIAP background,                                                                                                         
   • Project purpose,                                                                                                           
   • Proposed project,                                                                                                          
   • Permitting update and "next steps."                                                                                        
He addressed  AIDEA's role  and explained  that by statute,  AIDEA                                                              
was  created with  the foresight  to develop  the state's  natural                                                              
resources, which  in turn would provide long  term economic growth                                                              
for the  state and  would directly  and indirectly help  alleviate                                                              
MR.  SAN  JUAN  said  AIDEA  has  been  given  certain  tools  and                                                              
resources  to  be  able to  accomplish  its  mission;  with  those                                                              
tools,  AIDEA has been  able to  develop several  projects  in the                                                              
state by  either owning the project  or financing the  project. He                                                              
detailed AIDEA's projects as follows:                                                                                           
   • Mustang Operations Center 1, LLC (MOC 1):                                                                                  
        o Location: North Slope.                                                                                                
   • Mustang Road, LLC:                                                                                                         
        o Location: North Slope.                                                                                                
   • DeLong Mountain Transportation System (DMTS):                                                                              
        o Location: Northwest Arctic Borough.                                                                                   
   • FedEx Express Maintenance, Repair, and Operations (MRO)                                                                    
        o Location: Anchorage.                                                                                                  
   • Blood Bank of Alaska:                                                                                                      
        o Location: Anchorage.                                                                                                  
   • Camp Denali Readiness Center Addition:                                                                                     
        o Location: Joint Base Elmendorf-Richardson                                                                             
   • BlueCrest Energy Drill Rig:                                                                                                
        o Location: Kenai Peninsula.                                                                                            
   • Skagway Ore Terminal:                                                                                                      
        o Location: Skagway.                                                                                                    
   • Snettisham Hydroelectric Project:                                                                                          
        o Location: Juneau.                                                                                                     
   • Ketchikan Shipyard:                                                                                                        
        o Location: Ketchikan.                                                                                                  
3:36:02 PM                                                                                                                    
He referenced the "DMTS-Red Dog model success" as follows:                                                                      
   • Employment:                                                                                                                
        o Annual average of 550 jobs - average salary of                                                                        
        o 55 percent of year-round Red Dog Mine jobs filled by                                                                  
          the    NANA    Regional   Corporation,    Inc.    (NANA)                                                              
        o 78 percent of Teck Alaska workers live in Alaska.                                                                     
   • Northwest Arctic Borough (NWAB):                                                                                           
        o PILT payments for 2016 to 2021 estimated at:                                                                          
             square4 $14 million to $18 million annually.                                                                       
        o New Village Improvement Fund:                                                                                         
             square4 Payments of $4 million to $ 8 million annually.                                                            
        o Total wages in NWAB:                                                                                                  
             square4 $65 million.                                                                                               
   • Native Corporation Participation:                                                                                          
        o Royalties to NANA shared with other Alaska Native                                                                     
          Corporations (ANCSA Section 7(i)/7(j)).                                                                               
        o $1.1 billion shared by NANA since 1990:                                                                               
             square4 2016:                                                                                                      
                • $108.7 million NANA royalty;                                                                                  
                  • $65.8 million shared.                                                                                       
             square4 2017:                                                                                                      
                  • $247 million NANA royalty;                                                                                  
                  • $156.4 million shared.                                                                                      
MR. SAN JUAN  said DMTS is  considered one of the  state's success                                                              
stories, providing  over 500 direct jobs  at the mine site  and at                                                              
least  500 equivalent  indirect  jobs outside  of  the mine  site.                                                              
Revenues  to NWAB  in  the form  of  a payment  in  lieu of  taxes                                                              
(PILT) is  between $14 million and  $18 million annually.  New for                                                              
2018  is  a  village improvement  fund  which  ranges  between  $4                                                              
million to  $8 million annually.  Revenues to the  Native regional                                                              
corporation of  NANA which are shared  via ANSCA Section  7(i) and                                                              
7(j)  payments  with  other Native  regional  corporations  are  a                                                              
3:36:52 PM                                                                                                                    
He referenced the  "Stakeholders in the Red Dog  Mine" diagram and                                                              
explained  that  the image  represented  the stakeholders  in  the                                                              
region   along   with   agreements    and   sources   of   revenue                                                              
illustration. The  Red Dog Mine  model was a complex  project that                                                              
involved many  stakeholders and  agreements that made  the project                                                              
a success.                                                                                                                      
He referenced "Project history" images as follows:                                                                              
   • 1968 image that highlights a prospect in the Ambler Mining                                                                 
     District, also known as the Bornite Deposit.                                                                               
   • 1981 image that showed potential routes to access the                                                                      
     mining district after the passage of the Alaska National                                                                   
     Interest Lands Conservation Act (ANILCA).                                                                                  
He addressed "ANILCA  Provision for Ambler Access"  and said after                                                              
ANILCA's  passage,  Congress  understood   the  mining  district's                                                              
potential  and intended to  unlock the  state's natural  resources                                                              
by adding the following provision in ANILCA, Section 2041(b):                                                                   
     Congress  finds that  there  is a  need  for access  for                                                                   
     surface  transportation  purposes   across  the  Western                                                                   
     (Kobuk River)  unit of the Gates of the  Arctic National                                                                   
     Preserve  (from  the  Ambler   Mining  District  to  the                                                                   
     Alaska  Pipeline  Haul  Road) and  the  Secretary  shall                                                                   
     permit  such access  in accordance  with the  provisions                                                                   
     of this subsection.                                                                                                        
3:39:08 PM                                                                                                                    
MR.  SAN  JUAN  addressed  the "Project  Purpose"  to  unlock  the                                                              
resource-rich region's area as follows:                                                                                         
   • 75-mile-long mineralized area.                                                                                             
   • Minerals in the area:                                                                                                      
        o Copper,                                                                                                               
        o Zinc,                                                                                                                 
        o Lead,                                                                                                                 
        o Gold,                                                                                                                 
        o Silver,                                                                                                               
        o Cobalt.                                                                                                               
   • Resource estimates between two major deposits, "Bornite"                                                                   
     and "Arctic," discovered by Trilogy Metals, Inc:                                                                           
        o Copper: 8 billion pounds,                                                                                             
        o Zinc: 3 billion pounds,                                                                                               
        o Gold equivalent precious metals: 1 million ounces.                                                                    
He addressed "Goals of the Project" as follows:                                                                                 
   • Develop industrial access to the Ambler Mining District.                                                                   
   • Support exploration and development of mineral resources in                                                                
     the Ambler Mining District.                                                                                                
   • Promote economic development and job opportunities in the                                                                  
     region and the state.                                                                                                      
He  addressed  "AMDIAP  Department of  Transportation  and  Public                                                              
Facilities  (DOT&PF)  Corridor Alternatives"  and  explained  that                                                              
AIDEA took over  the project in 2013 from DOT&PF  and selected the                                                              
best  route  that would  be  less  impactful to  the  environment.                                                              
AIDEA also  avoided communities that did  not want the  road to go                                                              
through their community  and was able to move the  route away from                                                              
3:40:59 PM                                                                                                                    
MR.   DAVIS  addressed   the  "Ambler   Permitting  Process"   and                                                              
explained  that  under  NEPA, an  environmental  impact  statement                                                              
(EIS)  must be done,  like a  "building permit."  The Clean  Water                                                              
Act is  triggered, Section 404(b),  which brings in the  U.S. Army                                                              
Corps  of Engineers;  their job  is to  make sure  that the  route                                                              
picked is the least destructive and environmentally positive.                                                                   
MR. DAVIS said  the final step relates  to the right to  cross the                                                              
preserve,  as  noted   in  the  Alaska  National   Interest  Lands                                                              
Conservation Act  (ANILCA), that  results in an interplay  between                                                              
NEPA, Clean  Water Act, and  ANILCA. Permit filing  required under                                                              
ANILCA triggers  a federal action,  the Bureau of  Land Management                                                              
(BLM) is  engaged, and AIDEA  starts to  spend money. To  draft an                                                              
EIS, a third-party  contractor is hired through  the permission of                                                              
the  federal  government,  "HJR,  Inc."  was  selected  through  a                                                              
competitive  bid process  and the  company  is in  the process  of                                                              
drafting the EIS.                                                                                                               
He  detailed   that  four   federal  agencies   are  involved   in                                                              
permitting for the EIS:                                                                                                         
   • BLM-NEPA and Title XI of ANILCA.                                                                                           
   • The National Parks Service (NPS)/The Federal Highway                                                                       
     Administration (FHWA) - ANILCA Section 201(4) (Title II).                                                                  
   • U.S. Army Corps of Engineers (USACE) - wetlands permits.                                                                   
   • U.S. Coast Guard (USCG) - bridge permits.                                                                                  
He  said after  an EIS  the permitting  will  then involve  state,                                                              
local government, and other entities.                                                                                           
3:42:30 PM                                                                                                                    
He addressed the "NEPA Process" as follows:                                                                                     
   • File Notice of Intent:                                                                                                     
        o Delays with BLM, eight-month process;                                                                                 
        o BLM filed a notice in 2017;                                                                                           
   • Scoping:                                                                                                                   
        o Public meetings and input;                                                                                            
        o Road shifted due to comments;                                                                                         
        o Scoping process finished in February 2018;                                                                            
   • Alternative road analysis;                                                                                                 
        o BLM provided an alternative to AIDEA's route in                                                                       
          February 2019;                                                                                                        
        o HJR will analyze the alternative routes while keeping                                                                 
          that Congress has stated that the federal government                                                                  
          should provide Alaska with access to the mining                                                                       
        o AIDEA wants to use the existing infrastructure of the                                                                 
          Dalton Highway.                                                                                                       
   • Existing conditions, environmental impact analysis;                                                                        
   • Mitigation:                                                                                                                
        o Federal government may ask for mitigation issues to                                                                   
          buy other land to be set aside if wetlands are being                                                                  
          filled in or to mitigate wildlife impact;                                                                             
   • Draft EIS:                                                                                                                 
        o Public meetings and input;                                                                                            
   • Final EIS;                                                                                                                 
   • Record of decision;                                                                                                        
   • Note:                                                                                                                      
        o Formal       government-to-government       consultation                                                              
          throughout the NEPA process.                                                                                          
3:46:21 PM                                                                                                                    
MR. DAVIS addressed "Ambler Proposed Construction Costs (DOWL)"                                                                 
as follows:                                                                                                                     
   • Phase I:                                                                                                                   
        o 16-foot single-lane,                                                                                                  
        o Seasonal road,                                                                                                        
        o Approximately $280 million,                                                                                           
        o Allows other mines to explore deposits and get first-                                                                 
          production out for less money.                                                                                        
   • Phase II:                                                                                                                  
        o 18-foot single-lane,                                                                                                  
        o Year-round road,                                                                                                      
        o Approximately $40 million additional.                                                                                 
   • Phase III:                                                                                                                 
        o 32-foot two-lane,                                                                                                     
        o Year-round road,                                                                                                      
        o Approximately $60 million additional.                                                                                 
        o Based on needs if four to five mines came online.                                                                     
He noted that the  road was permitted for two lanes,  but the road                                                              
will be  built for what  works best for  the project. DMTS  is run                                                              
as a  single-lane road  with trucks  driving  down the middle  for                                                              
safety reasons.                                                                                                                 
3:48:23 PM                                                                                                                    
He addressed the "CRA Agreement for EIS Schedule" as follows:                                                                   
   • Draft EIS August 2019,                                                                                                     
   • Final EIS November 2019,                                                                                                   
   • Record of Decision (ROD) December 2019.                                                                                    
MR. DAVIS  noted that  the recent  government shutdown  may impact                                                              
the schedule.                                                                                                                   
He summarized  that AIDEA  is trying to  replicate the  DMTS. DMTS                                                              
was needed  because the  mine could not  operate unless  there was                                                              
some way  to get  the mine's  ore to  market. Without  access from                                                              
AMDIAP, getting ore  to market is very hard. AMDIAP  to the Dalton                                                              
Highway would allow  the ore to be transported "all  the way down"                                                              
or via the railroad.  The decision on how the  ore will ultimately                                                              
be transported  is up to  the mines and  not AIDEA. AIDEA  is only                                                              
trying  to  build  an industrial  access  corridor  and  then  the                                                              
private sector  takes over. AIDEA will  get paid back as  was done                                                              
at the Red Dog  Mine where bonds are "floated," and  the road will                                                              
have tolls  or payments  made where  the payments  over time  will                                                              
reduce the debt.  The life of the road should be  in excess of the                                                              
bonded indebtedness, the same as with the Red Dog Mine.                                                                         
He said the Ambler  Mining District is an important  district that                                                              
has  a lot  of good  mineralization.  Questions are  asked if  the                                                              
mines are  going to open  and be viable.  Trilogy Metals,  Inc. is                                                              
working very hard  along with South32, and other  investors should                                                              
be coming in as  well. AMDIAP can be a longer,  bigger DMTS. AIDEA                                                              
will not  operate or  invest in  a mine,  AIDEA will only  provide                                                              
the infrastructure  that ultimately could be sold by  the state in                                                              
the future.                                                                                                                     
3:51:37 PM                                                                                                                    
SENATOR   REINBOLD   asked   him   to   readdress   the   AMDIAP's                                                              
construction costs.                                                                                                             
MR.  DAVIS  explained  that the  construction  cost  estimate  was                                                              
provided by  DOWL, a well-known  contractor in the state  who does                                                              
work for  DOT&PF and acts as  AIDEA's project manager  for AMDIAP.                                                              
Construction  is phased-in where  the biggest  cost is in  phase 1                                                              
where  gravel  is brought  in  to  get  the roadbed  down.  Slight                                                              
expansion  does not  cost much.  Moving to a  two-lane road  costs                                                              
more  because  the  road's  apron  is  affected  where  additional                                                              
gravel  is required.  The assumption  is the  road will have  one-                                                              
lane  bridges because  two-land  bridges are  expensive. The  road                                                              
will be  controlled to  limit usage. Radio  and fiber  optics will                                                              
be used  to control trucks. Trucks  will have GPS  capabilities so                                                              
each  truck's exact  location  will be  known.  Expansion will  be                                                              
based on mining activity.                                                                                                       
SENATOR REINBOLD asked how AMDIAP will be funded.                                                                               
MR. DAVIS  answered that it  will be a public-private  partnership                                                              
that combines AIDEA  bonds with infrastructure funds  that like to                                                              
invest  in  projects like  AMDIAP  due  to its  steady,  long-term                                                              
payout. The EIS  is paid for; BLM confirmed that  no further funds                                                              
are required. HJR,  Inc. has said they do not  require any further                                                              
funds as well.                                                                                                                  
3:55:38 PM                                                                                                                    
SENATOR  GIESSEL asked  him to address  why DMTS  is a  successful                                                              
model,  have bonds  been  paid back,  and is  a  toll still  being                                                              
MR. DAVIS  answered that AIDEA  explained in its  presentation the                                                              
regional success  of DMTS.  The success for  AIDEA as  the finance                                                              
entity  is another  story. The bonds  for DMTS  were backed-up  by                                                              
legislative  appropriation. The  first thing  AIDEA did  on a  big                                                              
project was with  DMTS. The bonds were sold to  the private market                                                              
and the bonds will  be paid for in a couple of years.  The mine is                                                              
looking to expand  the road and port, but the mine  is not looking                                                              
at AIDEA  for assistance,  private  capital will  be used  for the                                                              
next phase.                                                                                                                     
MR. SAN  JUAN added  that there  are bonds  tentatively set  to be                                                              
paid off  by 2023. AIDEA has  an agreement with Teck  Alaska until                                                              
2040. The structured  agreements with stakeholders in  the Red Dog                                                              
Mine  have helped  accelerate  note payments.  The  DMTS model  is                                                              
successful because  if the commodity  prices go up over  a certain                                                              
dollar amount,  AIDEA gets additional  funds. If  zinc concentrate                                                              
shipments goes above  a certain amount, AIDEA  receives additional                                                              
SENATOR KAWASAKI  addressed Public Law 96-487 that  talks about an                                                              
access point between  the Alaska Pipeline Haul Road  to the Ambler                                                              
Mining  District. He  asked  if there  is  a specific  designation                                                              
from Congress  on what  the access to  the Ambler Mining  District                                                              
can be.                                                                                                                         
MR. DAVIS explained  that Congress sometimes writes  things rather                                                              
obliquely. AIDEA  pulled out the  committee record for  Public Law                                                              
96-487 and the  record showed that "surface  transportation" meant                                                              
an  "intermodal  transportation system,  i.e.,  a  road" from  the                                                              
Ambler  Mining  District  to  what  was  then  called  the  Alaska                                                              
Pipeline Haul Road, now known as the Dalton Highway.                                                                            
3:59:49 PM                                                                                                                    
SENATOR  KAWASAKI  noted  that   there  was  talk  about  using  a                                                              
"western  route"  before the  DOT&PF  project.  He asked  why  the                                                              
"western route" was not selected.                                                                                               
MR. DAVIS  answered  that DOT&PF  did look at  western routes  and                                                              
determined  that the routes  were not  as good environmentally  or                                                              
economically;  however,  BLM  may  analyze and  choose  a  western                                                              
route. The  western routes will  tend to cross conservation  units                                                              
under ANILCA which  are, in one case, a national  park and another                                                              
is a  national preserve.  There is  no congressional authority  to                                                              
cross  national parks  or national  preserves. Under  Title 11  in                                                              
ANICLA there is  a provision for crossing conservation  units, but                                                              
the act  has never been  done; the Izembek  Road is an  example of                                                              
an attempt  to use  that authority  but so far,  the road  has not                                                              
been built.  Also, the western  route has more wetlands.  Congress                                                              
wanted to  tie a road to an  existing intermodal system,  the idea                                                              
was the road  would connect with  an existing road. Also,  too the                                                              
west, the state  does not have a fully developed  port which would                                                              
mean a port would have to be built.                                                                                             
MR. SAN JUAN added  that part of the purpose-of-need  that BLM has                                                              
is  for year-round  access  and that  is part  of  the reason  BLM                                                              
selected an  alternative route.  He said  he was not  anticipating                                                              
seeing "western  routes" being proposed  as an alternative  due to                                                              
there not being year-round access.                                                                                              
SENATOR KAWASAKI  asked if  AIDEA checks  and verifies  the credit                                                              
worthiness of the company that is engaging in the prospect.                                                                     
MR.  DAVIS replied  that  AIDEA reads  the  reports; for  example,                                                              
reports  that   Trilogy  Metals  puts  out,   including  quarterly                                                              
reports. AIDEA  met with South32  several times and  due diligence                                                              
was done on  South32's capabilities. The other  potential partner,                                                              
Northwest  Alaska  Native  Association   (NANA),  which  owns  the                                                              
Bornite, AIDEA has  complete confidence in NANA.  AIDEA works with                                                              
NANA on the Red Dog Mine.                                                                                                       
4:03:39 PM                                                                                                                    
SENATOR  GIESSEL noted  that new  committee members  may not  know                                                              
that the Red Dog  Mine has a seasonal port. She  asked him to talk                                                              
about the Red  Dog Mine's storage facility used  during the winter                                                              
MR. DAVIS  explained that the  ore from the  Red Dog Mine  must be                                                              
lightered from a  storage unit that is so large  its buildings are                                                              
visible  from  outer space.  AIDEA  financed  the Red  Dog  Mine's                                                              
storage facility  so that the mine  could get around  the seasonal                                                              
shipment issue.                                                                                                                 
SENATOR  GIESSEL pointed  out that  the  idea of  a western  route                                                              
does not provide year-round access.                                                                                             
She addressed  the proposed  route for AMDIAP  and noted  that the                                                              
road would  go through  the southern  "boot" of  the Gates  of the                                                              
Arctic National Park  and Preserve. She asked him  to confirm that                                                              
Congress provided for transverse of the "boot."                                                                                 
MR.  DAVIS explained  that ANILCA  provides that  the "boot"  will                                                              
remain  National Park  Service (NPS)  land, but  NPS must  provide                                                              
Alaska with  access across  the preserve.  Thanks to U.S.  Senator                                                              
Stevens,  the proviso  is unique  with  a statutory  environmental                                                              
and  economic assessment  (EEA)  that will  probably  not be  seen                                                              
again. AIDEA  has contracted with  NPS for the preparation  of the                                                              
EEA  with  NPS working  on  two  possible  routes. He  noted  that                                                              
northern  and  southern  routes  are proposed  going  through  the                                                              
"boot" due  to a  lake that  has some  values. The secretaries  of                                                              
U.S.  Department  of Transportation  and  the U.S.  Department  of                                                              
Interior  will  pick  the  route  across the  "boot"  by  May.  He                                                              
reiterated  that the  route selection  may be  delayed due  to the                                                              
recent government shutdown.                                                                                                     
4:07:59 PM                                                                                                                    
SENATOR  GIESSEL  asked  him to  address  the  federally  required                                                              
economic evaluation  and pointed out that Alaska led  the way with                                                              
health-assessment-impact  evaluations  for  development  on  state                                                              
lands.  Alaska  was  the  first state  to  implement  the  health-                                                              
assessment-impact evaluations.                                                                                                  
MR.  DAVIS replied  that AIDEA  has retained  a health  assessment                                                              
contractor and  they are working  with BLM. He concurred  that the                                                              
state is stricter with assessments.                                                                                             
SENATOR KIEHL  asked if  AIDEA helped  develop DMTS with  internal                                                              
funds  or  state  general  funds.  He inquired  if  there  was  an                                                              
agreement for repayment via the mine company.                                                                                   
MR.  DAVIS explained  that  there was  an  appropriation that  the                                                              
Legislature gave  AIDEA the money  because at that time  AIDEA did                                                              
small  loans  through   banks;  afterwards,  financing   was  done                                                              
through the  bond market based  on the appropriation.  Teck Alaska                                                              
already  had  the mine  permitted  but  approached AIDEA  and  the                                                              
Legislature to get  "gap capital." AIDEA funded the  road and port                                                              
that  Teck  agreed  to pay  though  agreements  with  acceleration                                                              
clauses   and  sideboards.   AIDEA  has   paid  back  the   entire                                                              
4:10:51 PM                                                                                                                    
SENATOR  KIEHL  asked how  far  AIDEA is  in  on funding  for  the                                                              
AMDIAP project and what is the funding source.                                                                                  
MR. DAVIS replied  that he was not aware of how  much DOT&PF spent                                                              
prior  to AIDEA  taking  over the  project.  AIDEA  has spent  $17                                                              
million to date from appropriated funds.                                                                                        
SENATOR  KIEHL asked  him to  confirm  that the  project does  not                                                              
have agreements  with potential  mine operators  for repayment  or                                                              
road tolls.                                                                                                                     
MR. DAVIS  explained that after  the EIS and a  satisfactory route                                                              
is  selected, then  a statutorily  required finance  plan will  be                                                              
presented for  approval; after  the plan  is approved,  AIDEA will                                                              
meet with  mining companies  to draft  agreements. AIDEA  will not                                                              
build the road without agreements from the mining companies.                                                                    
MR.  SAN JUAN  added that  the Northwest  Arctic  Borough and  the                                                              
North Slope  Borough have presented  resolutions to invest  in the                                                              
AMDIAP project.                                                                                                                 
4:13:37 PM                                                                                                                    
SENATOR REINBOLD  noted that AIDEA has websites  on Ambler access.                                                              
She asked if the  "Roads to Resources" strategy is  still in place                                                              
so that Alaskans  can connect to the AMDIAP project.  She inquired                                                              
if there  is any major  pushback to the  AMDIAP project  and noted                                                              
the potential jobs associated with the project.                                                                                 
MR.  SAN  JUAN addressed  Senator  Reinbold's  question  regarding                                                              
opposition. He  noted that  most of the  mineral resources  are in                                                              
the Northwest Arctic  Borough, NANA region, but  the route crosses                                                              
Doyon lands  and non-borough  lands where  there is pushback  that                                                              
areas  outside  of  the  NANA region  have  said  they  are  being                                                              
impacted but not  benefiting from AMDIAP. He pointed  out that the                                                              
Red Dog Mine has shown the benefits from mining.                                                                                
MR. DAVIS explained  that former Governor Murkowski  had a general                                                              
idea of "Roads  to Resources," but  it was not defined.  AIDEA did                                                              
not  take the  AMDIAP  project  over from  DOT&PF  as  a Roads  to                                                              
Resources project.                                                                                                              
4:17:33 PM                                                                                                                    
SENATOR  RENBOLD opined  that there  appears to  be pushback  from                                                              
Doyon. She  noted that AIDEA's  website on AMDIAP  clearly defines                                                              
ANILCA as guaranteeing  certain rights of access  for subsistence,                                                              
hunting,  fishing, recreational,  and  other  economic and  social                                                              
purposes,  including  ensuring   access  to  resource  development                                                              
areas  within the  state.  She  asked if  AIDEA  will  be able  to                                                              
overcome Doyon's objection and possibly others.                                                                                 
MR. DAVIS  replied  that the  hope is  to come up  with a  project                                                              
that is satisfactory  to the stakeholders in the area.  There is a                                                              
lot  of  interest  in  jobs as  well  as  interest  in  preserving                                                              
subsistence  hunting. DMTS  has  a good  record  with the  caribou                                                              
mortality, very  few trucks  have killed caribou.  The hope  is to                                                              
get  local  hire. AIDEA  must  work  with local  communities  when                                                              
developing a project.                                                                                                           
SENATOR  KAWASAKI asked  him to  verify that  in the DMTS  project                                                              
that  Teck  had  already  gone  through  the  EIS  and  permitting                                                              
process  prior  to  AIDEA's  involvement  and  was  that  the  big                                                              
difference between DMTS and the AMDIAP project.                                                                                 
MR.   DAVIS  explained   that  AIDEA   is   building  the   AMDIAP                                                              
infrastructure  for exploration and  development whereas  DMTS was                                                              
designed  to help  a mine  that  was already  permitted. He  noted                                                              
that companies will  be charged to use AMDIAP  for exploration. He                                                              
opined  that there  is  a lot  of interest  in  the Ambler  Mining                                                              
region and the risk allocation for AMDIAP is less.                                                                              
4:21:20 PM                                                                                                                    
MR.  SAN JUAN  pointed  out  that the  AMDIAP  road  is to  unlock                                                              
resources for  a whole district, not  just for a specific  mine as                                                              
was done with the Red Dog Mine.                                                                                                 
SENATOR KAWASAKI asked  if the road for the Pogo  Mine Project was                                                              
permitted prior to road construction.                                                                                           
MR.  DAVIS answered  that  he  did not  know.  He  noted that  the                                                              
project had changed its "road usage."                                                                                           
SENATOR KAWASAKI pointed  out that AIDEA has spent  $17 million in                                                              
addition to  money spent by  DOT&PF prior to AIDEA's  involvement.                                                              
He asked if the  AIDEA board has assessed whether  the risk is too                                                              
high.  He opined  that prospectors  finding something  prior to  a                                                              
road project would be the logical process.                                                                                      
MR.  DAVIS replied  that  AIDEA monitors  the  development of  the                                                              
resources. He said  Trilogy Metals is available  to answer Senator                                                              
Kawasaki's   specific  questions.   Trilogy   Metals  is   finding                                                              
minerals and  the mineralization  is improving. Trilogy  Metals is                                                              
moving  towards  "feasibility"  which  is  an  advanced  stage  of                                                              
development.  Bornite  was mined  at  one time,  so  bornite is  a                                                              
known  resource in  the district.  AIDEA believes  that there's  a                                                              
good  chance   to  enter  into   agreements  after  the   EIS.  He                                                              
emphasized that  AIDEA is, "Not going  to build the road  and hope                                                              
that somebody shows up."                                                                                                        
4:24:23 PM                                                                                                                    
SENATOR BISHOP  asked him if AIDEA  is going to spend  $40 billion                                                              
for a $20 billion project to build a road.                                                                                      
MR. DAVIS answered no.                                                                                                          
SENATOR BISHOP commented  that he doubted if Fort  Knox would have                                                              
been built  without a road. He  said infrastructure is  the key to                                                              
unlocking  the state's  resources  and  referenced  the "7(i)  and                                                              
7(j)  royalties"  that have  been  paid  out  to all  13  regional                                                              
corporations from one project.                                                                                                  
CHAIR  BIRCH  recognized  that Tomas  Boutin,  the  new  executive                                                              
director for AIDEA, was in attendance.                                                                                          
SENATOR   KAWASAKI  asked   if   the  state   would  assume   road                                                              
MR. DAVIS explained  that AIDEA's model is not to  use state funds                                                              
or  any further  funds.  The  road will  probably  be  owned by  a                                                              
limited liability  corporation  in which  there would be  multiple                                                              
investors.  Within  the  multiple investors  structure  a  reserve                                                              
account  would be  set up  to cover  maintenance. The  maintenance                                                              
cost  would be  recouped from  the  tolls assessed  for using  the                                                              
road.  An  escalation  clause  would  allow for  the  toll  to  be                                                              
increased in order to cover unanticipated maintenance costs.                                                                    
4:27:21 PM                                                                                                                    
SENATOR  KAWASAKI  asked him  to  verify  that because  the  state                                                              
would not  be a party  to ownership of  the road itself,  the road                                                              
will not be public road or public access easement.                                                                              
MR.  DAVIS replied  that currently  the  road would  be a  limited                                                              
road and  it would not be  a public road  in the sense that  it is                                                              
built with public,  federal, or DOT&PF dollars.  The right-of-ways                                                              
have not  been negotiated. AIDEA  must see what type  of right-of-                                                              
way BLM  is willing to  give; then, if  the road receives  the EIS                                                              
and the decision  is to move forward with the  project, AIDEA will                                                              
have to negotiate  for permission to cross land  from the possible                                                              
landowners:   DNR,  Doyon,   and   NANA.   Landowners  often   put                                                              
restrictions  or  easements across  their  land.  He assumed  that                                                              
there   would  be   easement  restrictions   as   well  as   other                                                              
restrictions due  to environmental  mitigation. The road  will not                                                              
be open to the  public, but there could be other  uses of the road                                                              
beyond just  the mines. The  maturation of  the DMTS may  serve as                                                              
an example; originally,  strictly ore was moved on  the DMTS, then                                                              
the  local people  asked  if Tech  could  haul  supplies and  Tech                                                              
currently  brings  fuel  to  drop-off points.  If  the  road  goes                                                              
along, the road's governing body may accommodate petitioners.                                                                   
4:29:34 PM                                                                                                                    
SENATOR  REINBOLD referenced  the  slide, "What  is AIDEA's  role"                                                              
that highlights  AS 44.88. She  noted that ANILCA  established the                                                              
10  federal  parks,  preserves,   and  monuments  by  guaranteeing                                                              
certain  rights, one  of the  rights  was ensuring  access to  and                                                              
from resource development  areas within the state.  She reiterated                                                              
her previous  question on whether  AIDEA believes it will  be able                                                              
to  overcome  the resistance  to  the  road project,  noting  that                                                              
Congress has  recognized access to  the Ambler Mining  District to                                                              
ensure the state's economic and social needs are met.                                                                           
MR.  DAVIS replied  that the  congressional intent  is clear  that                                                              
Alaska was  meant to  be able  to cross  some of the  conservation                                                              
units,  but the crossing  has not  occurred.  He noted that  there                                                              
has been  some opposition, as  mentioned in the  scoping document,                                                              
a  public document  that is  posted  on BLM's  website. AIDEA  has                                                              
read  every comment  and part  of  the EIS  will be  to develop  a                                                              
route that  is compatible with all  of the comments;  for example,                                                              
the route was  adjusted to Bettles' request for  not having trucks                                                              
drive through town.                                                                                                             
SENATOR REINBOLD  clarified  that her question  relates to  ANILCA                                                              
being more  powerful than  public comment.  She inquired  if AIDEA                                                              
will be  able to work  through the  resistance for an  affirmative                                                              
"yes," noting that ANILCA is already law.                                                                                       
MR. DAVIS replied  that he cannot comment on  the state's position                                                              
on  ANILCA.  He  said  personally  he  would  agree  with  Senator                                                              
Reinbold  that   there  are  certain  provisions.   ANCILA  was  a                                                              
compromise and legislation  for the state to have  certain rights,                                                              
the federal  government to  have certain  rights, and  to preserve                                                              
certain subsistence  rights. He pointed out that  the U.S. Supreme                                                              
Court in the  "Sturgeon" decision finally admits  that, "Alaska is                                                              
different."  One  of  the  reasons AIDEA  was  interested  in  the                                                              
project was  to take  the right  granted in  ANILCA to  cross "the                                                              
boot" and see if AIDEA could make it work, that was the idea.                                                                   
4:33:11 PM                                                                                                                    
SENATOR  KAWASAKI asking  if  the Alaska  Department  of Fish  and                                                              
Game,  Alaska Department  of Environmental  Conservation, and  the                                                              
Alaska Department  of Natural  Resources have  enough staff  to be                                                              
able to properly permit the project.                                                                                            
He inquired  what would happen  if the  road gets permitted  but a                                                              
mine at the end of the road does not get permitted.                                                                             
MR. DAVIS  answered that he cannot  comment on the levels  of each                                                              
agency regarding  staffing. AIDEA  has worked  with the  Office of                                                              
Project  Management and  Permitting (OPMP)  on projects  including                                                              
the Ambler road  and OPMP has given tremendous  service in working                                                              
with BLM or the state.                                                                                                          
He  addressed mine  openings  in the  Ambler  Mining District  and                                                              
noted   that  agreements   will   have  "sideboards"   to   handle                                                              
contingencies. He  emphasized that AIDEA  will not enter  into any                                                              
kind of  agreements where  if something does  not work  AIDEA does                                                              
not get paid.                                                                                                                   
SENATOR  KIEHL pointed  out  that unlike  DOT&PF,  AIDEA does  not                                                              
have eminent domain.  He asked if significant route  changes occur                                                              
to accommodate  private landowners,  does  AIDEA have the  funding                                                              
in hand to go through the additional process.                                                                                   
MR.  DAVIS  answered  that  AIDEA's   board  passed  a  resolution                                                              
process  called "G11-18"  that allows  AIDEA,  under new  statutes                                                              
passed by  the Legislature,  to use its  own funds for  permitting                                                              
as part  of a project.  He detailed that  prior to  "G11-18" there                                                              
was a legal  issue about whether  AIDEA could permit or  AIDEA had                                                              
actually built  hard assets and  that was clarified. Now  if AIDEA                                                              
needs  more money  for  permitting,  change the  route,  or do  an                                                              
environmental  assessment  (EA)  which  is  part  of  an  EIS  for                                                              
modifications,  then AIDEA  with  board approval  could spend  its                                                              
own funds.                                                                                                                      
4:36:03 PM                                                                                                                    
SENATOR BISHOP asked how long the Record of Decision is good.                                                                   
MR. DAVIS  answered that  the length of  the "record  of decision"                                                              
is a matter  of the U.S. Court  of Appeals for the  Ninth Circuit.                                                              
There is nothing  in NEPA that says how long a  record of decision                                                              
is  good for.  He  said any  definitive  legal  opinion should  be                                                              
addressed to  the attorney  general. He noted  that he  has looked                                                              
at cases  where the tendency  is to say  five to six  years, after                                                              
that the  court has  tended to say,  "Well, we  need to  dust this                                                              
off and look at it again."                                                                                                      
SENATOR  KIEHL   addressed  the  slide,  "AIDEA   proposed  AMDIAP                                                              
Corridor"  and  pointed  out  that   AIDEA  noted  "major  mineral                                                              
deposits"  in  four  locations   and  "mineral  resources"  in  18                                                              
locations. He noted  that minerals that "hit the  haul road" still                                                              
has a ways to  go and questioned the cost to  a mine developer. He                                                              
asked  how many  mines  will  be needed  to  make  sure there  are                                                              
enough  payments  to  payoff  the   road  without  making  a  mine                                                              
uneconomic. He  inquired if the  first mine does it  and everybody                                                              
else is gravy.                                                                                                                  
MR.  DAVIS  answered  that  AIDEA  has  developed  computer-driven                                                              
counter-metric models.  Analysis has shown that one  mine would be                                                              
sufficient to  pay the  tolls for the  first two phases;  however,                                                              
one mine would not  be the optimal model. The optimal  model would                                                              
be  more  than one  mine.  He  noted  that  the scenario  he  just                                                              
described  is one of  the advantages  of using  AIDEA because  the                                                              
process  is not political,  an agency  is not  making a  decision,                                                              
and the AIDEA board  has seven members who are  tasked with making                                                              
the decision.                                                                                                                   
SENATOR  KIEHL commented  that one  mine  pays for  the first  two                                                              
CHAIR  BIRCH   thanked  the  AIDEA   presenters.  He   noted  that                                                              
questions  were raised  on development  costs and  asked Rick  Van                                                              
Nieuwenhuyse from Trilogy Metals to address the committee.                                                                      
4:39:33 PM                                                                                                                    
RICK VAN  NIEUWENHUYSE, President  and CEO, Trilogy  Metals, Inc.,                                                              
Vancouver,  British  Columbia,   Canada,  disclosed  that  he  has                                                              
history as a  geologist in the Ambler Mining  District dating back                                                              
to  the  late  1970s.  He  commended   U.S.  Senator  Stevens  for                                                              
forwarding  a hard-wired right  by the  state to traverse  federal                                                              
lands to access the incredible Ambler Mining District.                                                                          
He disclosed  that Trilogy  Metals has spent  $120 million  in the                                                              
district  since  2004. Trilogy  Metals  has formed  a  partnership                                                              
with  a major  Australian  mining company  based  in Perth  called                                                              
"South32."  Australian  mining  companies  have been  moving  into                                                              
Alaska in a  significant way in terms of  investment, particularly                                                              
in mining.  South32  is a  $17-billion-market company,  generating                                                              
$1.5  billion   of  free  cashflow   a  year  from   their  mining                                                              
operations, mainly in the southern hemisphere.                                                                                  
MR.  VAN   NIEUWENHUYSE  said  Trilogy   Metals  has   expended  a                                                              
significant  amount of dollars  and without  an access  road there                                                              
will  be no  mine. Trilogy  Metals  has had  discussions with  the                                                              
U.S. Army  Corps of Engineers who  has said they would  not permit                                                              
the mine  before a road  is permitted because  there is no  way to                                                              
connect anything.                                                                                                               
He  explained   that  the  proposed   mine  would   produce  metal                                                              
concentrates  of copper,  zinc, and  lead. The  lead contains  the                                                              
gold and  silver. Trilogy  Metals has  looked airships  and Boeing                                                              
747  long-haulers, but  air transportation  is  too expensive.  He                                                              
detailed  that  the  concentrates  will be  transported  in  metal                                                              
boxes with  locking lids  so that concentrates  are not  lost, and                                                              
the environment  is protected.  The concentrates  would be  hauled                                                              
to Fairbanks  to link with the  Alaska Railroad and  ultimately be                                                              
hauled to the Port  of Anchorage where the metal  boxes are loaded                                                              
directly into  ships' holds  via overhead  cranes. He  pointed out                                                              
that there  will be jobs  at the mine,  jobs at the  security gate                                                              
to  ensure   the  road  has   limited  private  access,   jobs  in                                                              
Fairbanks, and jobs in Anchorage.                                                                                               
4:43:45 PM                                                                                                                    
SENATOR KAWASAKI asked where the metal concentrates go.                                                                         
MR.  VAN NIEUWENHUYSE  answered  that the  concentrates will  most                                                              
likely  go to  smelters in  Japan,  Korea, and  China. The  United                                                              
States strictly has dedicated smelters.                                                                                         
SENATOR KIEHL  said he  reviewed Trilogy's  recent 10-K  financial                                                              
report  and noted  that  the company  had said  it  does not  have                                                              
proven  or probable  reserves  yet.  He asked  if  Trilogy has  an                                                              
indicated reserve  that Mr. Van Nieuwenhuyse could  share with the                                                              
MR.  VAN  NIEUWENHUYSE  answered  that  there  are  resources  and                                                              
reserves.   Trilogy   completed   a  pre-feasibility   study   and                                                              
therefore Trilogy  has "probable" reserves  of 43 million  tons of                                                              
roughly copper five-percent  copper equivalent. Trilogy  is in the                                                              
process  of completing  a  feasibility.  Trilogy  is spending  $18                                                              
million in a  summer field program in the Ambler  Mining District.                                                              
After  the summer  field  program, Trilogy  will  have proven  and                                                              
probable  reserves at  the Arctic  mineral  deposit. He  disclosed                                                              
that the  Bornite mineral  deposit  is a few  years behind,  about                                                              
four  or five  years behind  Arctic  in terms  of its  development                                                              
cycle. He said Arctic has indicated and inferred resources and                                                                  
Trilogy will be updating at the end of the month.                                                                               
CHAIR BIRCH thanked Mr. Van Nieuwenhuyse, Mr. Davis, and Mr. San                                                                
Juan for providing information to committee members on the                                                                      
Ambler access road project.                                                                                                     
4:46:10 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Birch adjourned the Senate Resources Standing Committee                                                                   
meeting at 4:46 p.m.                                                                                                            

Document Name Date/Time Subjects
AIDEA Ambler Access Project Presentation 2.13.19.pdf SRES 2/13/2019 3:30:00 PM