Legislature(2005 - 2006)
02/08/2006 02:10 PM Senate RES
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* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE RESOURCES STANDING COMMITTEE
HOUSE RESOURCES STANDING COMMITTEE
February 8, 2006
2:10 p.m.
MEMBERS PRESENT
SENATE RESOURCES
Senator Thomas Wagoner, Chair
Senator Ralph Seekins, Vice Chair
HOUSE RESOURCES
Representative Jay Ramras, Co-Chair
Representative Kurt Olson
Representative Harry Crawford
MEMBERS ABSENT
SENATE RESOURCES
Senator Ben Stevens
Senator Fred Dyson
Senator Bert Stedman
Senator Kim Elton
Senator Albert Kookesh
HOUSE RESOURCES
Representative Ralph Samuels, Co-Chair
Representative Jim Elkins
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Paul Seaton
Representative Mary Kapsner
COMMITTEE CALENDAR
PRESENTATION: The Alaska Mining Association
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
STEVE BORELL, Executive Director
Alaska Miners Association
Anchorage, Alaska
POSITION STATEMENT: Testified on behalf of mining companies in
Alaska.
JIM CALVIN, Economic Analyst
McDowell Group
Juneau, Alaska
POSITION STATEMENT: Presented economic study funded by the
Alaska Miners Association.
ACTION NARRATIVE
CHAIR THOMAS WAGONER called the joint meeting of the Senate and
House Resources Standing Committees to order at 2:10:37 PM.
Senator Wagoner and Representatives Olson, Ramras and Crawford
were present at the call to order. Senator Seekins arrived
while the meeting was in progress.
^PRESENTATION: The Alaska Mining Association
CHAIR WAGONER announced that the committee would now hear a
presentation from the Alaska Mining Association.
2:11:20 PM
STEVE BORELL, Executive Director, Alaska Miners Association,
said the mining industry is at a unique time in history with
precious and base metal prices being at their highest in recent
history. He said that in 2006 exploration will be extensive.
He said the Alaska State Legislature has created a positive
climate for resource development in Alaska, and "we are very
appreciative of that." He said he will speak about current and
future mines in Alaska. He said the Alaska Miners Association
has contracted with the McDowell Group to do an economic
analysis. Several mine representatives introduced themselves in
the audience.
2:15:00 PM
MR. BORELL referred to the Usibelli Coal Mine and said Alaska's
coal has a low sulfur content, and that emissions from coal
plants nationwide are declining in spite of increased activity.
He said the demographics of the people who work at the mine site
are extremely interesting. He noted that 27 percent of the
employees of the Usibelli coal mine are either second or third
generation coal miners. Mr. Borell said the company produces 95
jobs and contributes to other industry jobs, like railroad and
power plant jobs. He added that safety is Usibelli's number one
priority.
2:17:00 PM
MR. BORELL said that the Kennecott Greens Creek Mining Company
is a joint venture, and it is the largest private employer in
Southeast Alaska. He said the mine has several years of
reserve, but it is spending about $4.2 million in exploration.
He said the mine was certified in the Environmental Management
System, which is difficult to attain.
2:19:12 PM
MR. BORELL pointed out that NANA Regional Corporation owns the
Red Dog Mine and Teck Cominco is the operator. The Red Dog Mine
is the largest zinc concentrate producer in the world. He noted
that 30 years of reserve remain at the project site, and 50 to
60 percent of employees are NANA shareholders. He showed a
picture of a lightering vessel. NANA also receives royalties,
he added.
2:21:15 PM
MR. BORELL said the Fort Knox Mine in Fairbanks employs over 440
people. He noted that the safety record is good; the mine has
worked over 1 million worker hours without a lost-time accident.
He said the mine's reservoir has a healthy population of
grayling and burbot, and when the mine is done, the state will
own the lake and fishing will be allowed.
2:23:12 PM
MR. BORELL informed the committees that the construction of the
Pogo Mine is almost complete, with the first gold pour expected
within a few days. He showed a picture of the first production
stope. He said the mill is state-of-the-art and the permanent
workforce is expected to be 238 at full production. He said all
of the people being hired from Alaska have already been found.
There is a worldwide shortage of experienced underground miners,
he noted.
2:26:05 PM
MR. BORELL said that the Kensington Gold Mine is expected to
begin in 2007, producing 100,000 ounces of gold per year for at
least 10 years. The annual payroll, including benefits will be
$16 million. He said there is a mine training course occurring
now, with 25 attendees. He said 15 of the trainees are
shareholders of Goldbelt, Kake, or Klukwan. The mine is not
visible from Berner's Bay, he stated. The company has received
many environmental awards, and its motto is "producing and
protection," he noted.
2:28:06 PM
MR. BORELL related that the Nixon Forks Mining Project near
McGrath shut down because of low metal prices. He said trucks
will go underground to get the ore, and operations will begin in
the summer of 2006 with 58 full-time jobs. He stated that the
company has a reclamation bond in place of $3.5 million. The
mine life is two to three years and it does not lend itself to
developing a large reserve. There is a significant amount of
gold that is still in the tailings that will be reprocessed, he
noted.
2:30:08 PM
MR. BORELL informed the committees the Rock Creek Project in
Nome is a conventional open pit mine that has been extensively
mined. There will be production at two sites, he said, and one
of those is eight miles from Nome. He said it has the first
road in the roads-to-resources program, which made possible the
ability to bring ore from Big Hurrah. There will be 7,000 tons
milled per day with a mine life of four to five years. He said
the power will be provided by Nome Utilities. He said the mine
has already purchased equipment, and there will be 135 new jobs,
which is an unheard of opportunity in that area. He said there
will not be a camp, so workers will have to drive to work.
2:33:26 PM
MR. BORELL explained that the Chulitna Coal Project is located
on the Kenai Peninsula, west of Anchorage, Alaska. He said two
individuals have been investing in it since 1978, and he showed
a map of its location. He explained that there will be a
conveyer belt to carry the coal down, and there will be a road
along side it, but it is unknown which one will be used. He
said it is over a mile into Cook Inlet to get to deep water.
There is a 300 million ton mine-able deposit in logical mining
unit one and there is a possible additional area. He said the
total investment is projected to be $350 to $400 million, the
earliest start date is 2007 and it will employ 350 people.
Vessels will have a 60-foot draft to make it economical to haul
coal, he added.
2:35:51 PM
MR. BORELL turned to the Donlin Creek Project, which is located
on Calista Native Corporation land and run by Placer Dome that
was recently taken over by Barrick Gold. The combined company
will have 26 mines worldwide. He said the 2006 field season is
moving forward rapidly, but in 2005 111 Kuskokwim area residents
worked at the mine site. He noted that the mine has ongoing
wind power studies. He related that the company is doing a
feasibility study, and there will be twice the amount of
drilling in 2006 as in 2005.
2:38:08 PM
MR. BORELL showed "an extremely important slide" showing local
shareholders as supervisors who work at the Donlin Creek
Project, including a geologist, equipment operator, and a
warehouseman.
2:39:03 PM
MR. BORELL then informed the committees that Northern Dynasty
Minerals Ltd. (NDM)has placed its permitting on hold for a year
in order to bring in larger drills to the Pebble Mine because it
has discovered significant findings to the east of the deposit.
New drills can go down 6,000 feet, he noted. He said they need
to understand the eastern zone, and there will be additional
training for bear guards and drill helpers. He said there are
scholarship programs that were donated by Northern Dynasty. "We
need mining engineers like never before," he stated.
MR. BORELL said the Alaska Native Science Engineering Program, a
program with which NDM worked, just received a national award.
The company will hire many Alaskans, he opined. In 2005 there
were 609 employees of which 75 percent were Alaskans.
2:42:26 PM
MR. BORELL distributed a report by the McDowell Group hired by
the Alaska Miners Association to review the economic impacts of
Alaska's mining industry.
2:43:38 PM
JIM CALVIN, Economic Analyst, McDowell Group, explained that the
McDowell Group is a research and consulting business that is
well known in the visitor and commercial fishing industries. He
said the company has a broad perspective on Alaska's economy,
but this is the company's first effort at looking at statewide
economic impacts.
2:45:52 PM
MR. CALVIN said the report considered the mining industry to be
composed of many activities, including big mines; dozens and
dozens of small-scale and medium-scale placer mining
operations;" and small sand, rock and gravel quarrying
activities in nearly every community in the state. He said the
research focused on 2004 when mining companies spent over $70
million on exploration projects in Alaska and $200 million on
mine development. The economic impact was 2,900 annual jobs
with a payroll of $194 million.
2:48:11 PM
MR. CALVIN highlighted that there are over 5,100 jobs associated
with the industry. However, it's not on the same scale of oil
and gas, fishing, tourism, or state government in terms of its
overall economic impact to the state, he added. He said it is
more interesting to look at the local impacts. For instance,
the average annual salary is $70,000 for Alaska workers in metal
mines, and they are year round jobs. Over 80 percent of people
employed in mining are Alaska residents. He added that during
the construction phase of the Pogo Mine the employees were
mostly Alaska residents. Many mining industry jobs occur in
rural Alaska where there are very few private sector
opportunities.
2:50:43 PM
MR. CALVIN said mining jobs have become an important part in the
economy in certain boroughs, especially the Red Dog and Fort
Knox Mines. In fact, the Greens Creek Mine is the largest
private sector employer in Juneau and it's a critical source of
private sector jobs. The mining industry is a key source of
income for governments around Alaska, he noted. He said three
quarters the borough's total general fund came from the Red Dog
Mine last year. Fort Knox is the second largest property
taxpayer in the Fairbanks North Star Borough. He listed other
mines that were important sources of revenue to local
governments.
2:53:26 PM
MR. CALVIN informed the committees that the mining industry
generated $16 million in state government receipts in 2004 from
mining license taxes and various rents and royalties. He noted
that these figures are from 2004 when metal prices were just
beginning to recover, so he said he expects the figures to be
higher in following years. He spoke of infrastructure benefits
of the mining industry, including the Alaska Railroad. He noted
that electric power rates are lower for Fairbanks residents
because of the use of power by mining.
2:55:44 PM
MR. CALVIN related that a power line extension was just
completed to Greens Creek and that line can be used to provide
power to Hoonah. He added that mining provides opportunities to
Alaska Natives, including the NANA Regional Corporation. He
said the Red Dog Mine has paid about $100 million since the
1980s and it has employed 1,000 different NANA shareholders.
2:57:52 PM
MR. CALVIN pointed out that there are important linkages between
the mining industry and Native interest in terms of business
relationships and opportunities. In fact, 120 of the 480 or so
Red Dog Mine employees are actually employees of subsidiaries of
NANA Regional Corporation. Similarly, Placer Dome, the
developer of the Donlin Creek project, has entered into
exploration and mining lease agreements with Calista and
Kuskokwin Corporations. Therefore, he opined that the mining
industry is doing very good things for the Native interests in
Alaska. In closing, Mr. Calvin reminded the committee that the
mining industry provides high paying jobs, year round jobs, jobs
for rural residents, and training opportunities that are
transferrable throughout the state and other industries.
Furthermore, the mining industry is a capital intensive
business, which means that local governments can enjoy
significant benefits from property tax revenues. In fact, the
property tax and sales tax revenues generated from the mining
industry and its employees far exceed any local government
expenditure on services to the mine or the mine-related
population. Furthermore, the mining industry helps build and
support infrastructure that benefits present and future
Alaskans. Mr. Calvin opined that the mining industry provides a
nearly ideal package of economic benefits and it's an industry
that the state can nurture because it has room to grow.
3:03:21 PM
CHAIR WAGONER relayed that he is very happy to see the condensed
version of the McDowell Group research. He said people are
interested in this issue.
SENATOR SEEKINS expressed interest in the political process of
the opposition to the Pebble Mine, and he asked about the
environmental challenges and how they are being addressed.
MR. BORELL said he looks critically at companies that come into
Alaska because he does not want them to make a mess. He said
NDM picked the best individuals to do environmental analyses.
He said the area was selected by the State of Alaska for its
mineral values long before minerals were ever found. He said
NDM raised significant amounts of money to drill in the area.
If the project becomes a mine, the following would occur: an
additional year of drilling, reevaluation of the mine plan, and
a three-year environmental impact statement process with all the
state and federal agencies. If, after the aforementioned, the
mine is permittable, the mine will have 1,000 jobs for 50-100
years in a place where there are few jobs. The aforementioned
is a huge potential benefit to the local communities, he opined.
3:09:54 PM
SENATOR SEEKINS opined that the permitting process is very
cautious in evaluating risks, and he asked if there is value in
having the legislature perform a review to ensure that these
agencies are adequately protecting the interests of the people
of Alaska. He further asked if the [state agencies] are staffed
well enough to do the aforementioned without additional
legislative oversight.
MR. BORELL replied yes, adding that the state agencies have
extremely competent people. In fact, many of them have just
gone through the permitting process for the Pogo Mine. He
suggested that the legislature has appropriately defined land
planning for the state. He explained that the land plans aren't
based on a project; the environmental impact statement (EIS) is
the project permit approach. The overall intent of the land
plan is to establish the ground rules upon which a company can
make long-term decisions. Mr. Borell opined that extreme is
uncertainty created when the state comes back in to do
additional land planning once a company has a project that it
wants to move forward for permitting. Furthermore, there has
been much discussion [and effort] to streamline permitting.
Adding an additional planning process in the middle of a project
isn't appropriate [in streamlining]. Mr. Borell opined that the
current system works well.
SENATOR SEEKINS suggested that sometimes simple opposition to
and desire to kill a project is expressed as the need to study
it and obtain more information on it. Therefore, Senator
Seekins expressed concern that if there aren't adequate
mechanisms and staff in place, then that should be addressed
rather than studying a project to death.
3:14:18 PM
CHAIR WAGONER pointed out that the federal government is working
on new mine safety regulations, and inquired as to the impact
that will have on future Alaska mining.
MR. BORELL said that he has had a glimpse of a few of the things
being done by the federal government. Although there are some
things that can be improved upon, he related his understanding
that the global positioning satellite technology that could
provide knowledge as to the location of people doesn't exist.
Mr. Borell acknowledged that any fatalities are too many, but he
also pointed out that the mining industry is far safer than most
other industries, including the construction industry. He
opined that the current laws now are extremely stringent and the
inspectors who review the mine sights already have much
authority.
3:17:07 PM
ADJOURNMENT
There being no further business before the committees, the joint
meeting of the House and Senate Resources Standing Committees
was adjourned at 3:17:19 PM.
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