HOUSE RESOURCES STANDING COMMITTEE February 22, 1995 8:04 a.m. MEMBERS PRESENT Representative Joe Green, Co-Chairman Representative Bill Williams, Co-Chairman Representative Scott Ogan, Vice Chairman Representative Alan Austerman Representative Ramona Barnes Representative John Davies Representative Pete Kott Representative Irene Nicholia Representative Eileen MacLean MEMBERS ABSENT None OTHER LEGISLATORS PRESENT Representative Kim Elton COMMITTEE CALENDAR Presentation on the Alaska Juneau Mine by Echo Bay Presentation by the Alaska Minerals Commission CSSJR 6: Relating to federally held property in those states, including Alaska, admitted to the Union since 1802. PASSED CSSJR 6(RES) OUT OF COMMITTEE WITNESS REGISTER DAVID STONE, Manager Public Affairs Echo Bay 3100 Channel Drive Juneau, AK 99801 Phone: 463-5704 POSITION STATEMENT: Gave presentation on Alaska Juneau Mine EARL BEISTLINE, Chairman Alaska Minerals Commission P.O. Box 80148 Fairbanks, AK 99708 Phone: 479-6240 POSITION STATEMENT: Gave presentation on AK Minerals Commission and answered questions HAROLD NOYES, Member Alaska Minerals Commission 201 1st Avenue Fairbanks, AK 99701 Phone: 452-4755 POSITION STATEMENT: Answered questions ERIC MACKINNON, Member Alaska Minerals Commission 1114 Glacier Highway Juneau, AK 99801 Phone: 586-1254 POSITION STATEMENT: Answered questions AL CLOUGH, Development Specialist Mining and Minerals Division of Economic Development P.O. Box 110804 Juneau, AK 99811-0804 Phone: 465-5463 POSITION STATEMENT: Answered questions DON STEVENS, Member Alaska Minerals Commission 1048 W. International Airport Road Anchorage, AK 99517 Phone: 561-1797 POSITION STATEMENT: Answered questions JOE AMBROSE, Aide Senator Robin Taylor State Capitol, Room 30 Juneau, AK 99801 Phone: 465-3873 POSITION STATEMENT: Prime Sponsor SJR 6 PREVIOUS ACTION  BILL: SJR 6 SHORT TITLE: TRANSFER FED. LAND TO POST-1802 STATES SPONSOR(S): SENATOR(S) TAYLOR, Halford, Kelly, Sharp, Frank, Green, Pearce JRN-DATE JRN-PG ACTION 01/16/95 11 (S) READ THE FIRST TIME - REFERRAL(S) 01/16/95 11 (S) RESOURCES 02/01/95 (S) RES AT 03:30 PM BUTROVICH ROOM 205 02/01/95 (S) MINUTE(RES) 02/03/95 159 (S) RES RPT CS 5DP NEW TITLE 02/03/95 159 (S) ZERO FISCAL NOTE (S.RES) 02/03/95 (S) RLS AT 12:10 PM BELTZ ROOM 211 02/03/95 (S) MINUTE(RLS) 02/06/95 181 (S) RULES TO CALENDAR 2/6/95 02/06/95 183 (S) READ THE SECOND TIME 02/06/95 183 (S) RES CS ADOPTED UNAN CONSENT 02/06/95 183 (S) ADVANCED TO THIRD READING UNAN CONSENT 02/06/95 183 (S) READ THE THIRD TIME CSSJR 6(RES) 02/06/95 183 (S) COSPONSOR(S): FRANK, GREEN, PEARCE 02/06/95 184 (S) PASSED Y15 N- E4 A1 02/06/95 185 (S) TRANSMITTED TO (H) 02/08/95 263 (H) READ THE FIRST TIME - REFERRAL(S) 02/08/95 263 (H) RESOURCES 02/20/95 (H) RES AT 08:00 AM CAPITOL 124 02/20/95 (H) MINUTE(RES) ACTION NARRATIVE TAPE 95-22, SIDE A Number 000 The House Resources Committee was called to order by Co-Chairman Green at 8:04 a.m. Members present at the call to order were Representatives Green, Ogan, Austerman, and Kott. Members absent were Representatives Williams, Barnes, Davies, MacLean, and Nicholia. HRES - 02/22/95 PRESENTATION ON ALASKA JUNEAU MINE BY ECHO BAY DAVID STONE, MANAGER, PUBLIC AFFAIRS, ECHO BAY MINES, stated he would give a brief background on Echo Bay, a brief history on the Alaska Juneau (AJ) mine project and talk about the economic impacts of the project using a slide presentation. MR. STONE stated Echo Bay mines is a publicly traded company listed on the American, Toronto and Swiss exchanges. Echo Bay mines got its start 30 years ago in the Northwest Territories of Canada, reopening the Port Radium mine. He said Port Radium was originally, during World War II, the sole source of uranium for the Manhattan Project. Echo Bay Mines did not open Port Radium for uranium but opened it for a satellite silver deposit and began to develop that deposit in 1964. He explained Echo Bay Mines was originally a subsidiary of an American corporation called IU International out of Philadelphia. MR. STONE stated Echo Bay Mines began production in the mid-1960s of the high grade silver deposit at Port Radium. Echo Bay Mines flew in materials from Yellowknife. He said by a fluke, Echo Bay became a large player in the gold mining industry because of the Hunt Brothers trying to corner the silver market in the late 1970s. At that time, Echo Bay forward sold every ounce of silver left in the mine and made about $50 million profit in one day, selling at an average price of $50 an ounce. MR. STONE said in 1979 the Port Radium mine began to go out of business and noted the deposit had been mined out. Echo Bay took the cash made in profits and invested it in a property further to the north and east called Lupin, also in the Northwest Territories. He showed a slide of Port Radium as it looked in 1978 and a slide of it as it looked in 1980. Since then, Echo Bay has reseeded and capped all of the roads around the tailing sites. He noted the only thing left at the site is a monument which says there was a mine there and a small cabin the Canadian Mounted Police had established as an outpost prior to the mine ever being built. Number 115 MR. STONE reiterated that Echo Bay invested the monies made on Port Radium into Lupin. Lupin is 450 miles northeast of Yellowknife and everything shown on the slide was flown in on a C130 Hercules. He noted Echo Bay set a world record on the number of flights and the amount of material hauled. The project began production in 1981. Echo Bay had 1 million ounces of reserves, to date has produced 2 million ounces of gold and still has 1 million ounces in reserves. He stated Echo Bay has 420 employees working on the project. He said a number of employees live in the U.S. as well as Canada and fly on a 727 to the project. He noted there is a great deal of wildlife, particularly in the summer months, migrating through the area. MR. STONE stated after Echo Bay began production at Lupin, they pioneered the use of ice roads over lakes to supply fuel and other materials to the project. Once a year all of the nonperishable supplies are brought into the project site over a series of ice roads which are about 450 miles in length. Currently, there are major exploration activities, close to Lupin, where there are diamond deposits. That project is also supplying all of its activities through Echo Bay's ice roads. He noted these roads disappear in the summer (melts), so there is minimal environmental impact. Number 158 MR. STONE explained in 1985, Echo Bay became the operating partner and purchased 50 percent interest in Round Mountain. Echo Bay's other partner is Case Pomeroy and Homestake Mining. Round Mountain has the distinction of being the largest heap leach open pit gold mine in the world in terms of size. Round Mountain is based in Nevada in the Smokey Valley, has operated for a number of years, and has extensive reserves. Echo Bay has approximately 600 employees at that site. He said an interesting feature about Round Mountain is that Echo Bay operates the largest day care in the state of Nevada. The site has a number of husband and wife employees so they are able to bring their children to the day care facility. He noted they also have the option of taking a two week vacation every year and the day care facility will watch their kids for two weeks, 24 hours a day. MR. STONE stated Echo Bay also operates the McCoy Cove mine which was purchased in 1987. The McCoy Cove mine is the largest silver producer in North America. Last year the mine produced in excess of 10 million ounces of silver. He noted, however, that the mine is really a gold mine. The McCoy Cove mine produced in excess of 300,000 ounces of gold and it is Echo Bay's biggest producer of the four mines it has. MR. STONE said located in northeastern Washington, near Spokane, Echo Bay's smallest mine is called Kettle River. The Kettle River mine is the largest employer in the county and employs the largest number of natives from the Colville Indian Reservation. Kettle River operates as a mill which is fed ore from a series of satellite deposits and Echo Bay mines and then trucks the material to the mill. He stated the mill produces 70,000-100,000 ounces a year. The Kettle River mine is a very modern mill and is very quiet, clean and a well-run operation. Number 212 MR. STONE told committee members that Echo Bay has two projects in Alaska in the development stage--the Kensington joint venture which is about 45 miles north of Juneau and the AJ project in Juneau. Going back in time, he said the Juneau gold belt is to Alaska in terms of hardrock gold mining what the North Slope is to Alaska in oil. The Juneau gold belt is the primary source of lode gold deposits developed historically in Alaska. There were 46 producing hard rock deposits throughout the gold belt and in the center of the gold belt is Juneau and Douglas Island. MR. STONE explained gold was discovered in 1880 by Joe Juneau and Richard Harris in Silverbow basin. The gold was originally placer mined and then the lode deposits were developed in the late 1880s and extensively by the turn of the century. He said the first deposits developed on a large scale were actually on Douglas Island at the Treadwell mines, which consisted of four mines: the Treadwell, the Mexican, the 700 Foot, and the Ready Bullion. By the late 1880s, the Treadwell mines were the world's largest gold mining operations, mining 5,000 tons of ore a day, roughly taking 10 tons of ore to get an ounce of gold and 42 percent of the gold produced was paid out in dividends. He noted the mines were the largest, single industrial operation in Alaska and were very responsible for the development of the territory, particularly in Southeast but also in the Interior. MR. STONE said the Treadwell mines grubstaked prospectors. Many of the prospectors who were at the site of the discovery of the Klondike had worked at Treadwell the prior year. The Treadwell mines also had the distinction of building the largest single stamp mill ever built in the history. He explained the stamp mill was the premier milling device used at that time. There were 960 stamps on the property. He noted the hammers were 1,280 pounds a piece and would raise and drop on the rock, pulverizing it into sand. Simple gravity concentration was then used and the gold was recovered through amalgamation using mercury, as well as through cyanidation. He showed a slide showing a typical gold bar. He noted each gold bar typically weighed 100 pounds. The Treadwell could produce up to 200,000 ounces in one year. Number 264 MR. STONE pointed out the Treadwell mines met their demise, not through the exhaustion of ore reserves but through the allowance of salt water into the mines through a cave-in which occurred in 1917. At the same time, there were a number of properties being developed with two specifically being developed on the other side of the channel, the Alaska Juneau mine and the Alaska Gastineau or Perseverance mine. He said the Alaska Gastineau mine started in the 1880s and by 1912 a 100 stamp mill was operating only seasonally because of its high elevation and a lack of access to tide water and seasonal water power which ran the mill. The company decided the key to developing the property was on a very large scale which meant tide water access and a very large mill. MR. STONE showed a slide containing lines which indicated tunnels. The lower line was a tunnel which began in 1912, was completed in 1914 and was the Sheep Creek adit. The Sheep Creek adit gave access to Sheep Creek Valley which then gave access to tide water. He noted the Sheep Creek adit was 10,497 feet long and was driven at the fastest rate of any tunnel ever driven in the world. Via Sheep Creek Valley, the ore could be hauled to the mill at tide water. He said the mill was a revolutionary mine--instead of using stamps, pebbles were used as a grinding medium. The mill was capable of grinding 12,000 tons of ore a day and would revolutionize the mining industry. Today, when one looks at a modern mill, they see the evolution of this mill. Number 304 MR. STONE stated in order to power the mill, two state-of-the art hydroelectric projects were built--one being Salmon Creek. Salmon Creek was the first thin arched dam ever built in the world. The Salmon Creek dam is 172 feet high, 648 feet across at the crest, and contains 52,000 cubes of cement. He noted Salmon Creek still produces power today and is the lowest cost power producer in the state. Coincidentally, the Annex Creek project was also built on the Taku Inlet. The Annex Creek project was the first lake tap, where a tunnel was driven underneath a lake, tapping through the bottom of the lake, and the water went through the tunnel into a pipeline down into the power house. He said this power plant was on line seven and one-half months after discovering the site in 1915. He noted a federal power permit was applied for with the Forest Service. That permit was received two years after the project was completed and the permit to begin production of power was received four years after the project was completed. He said the regional forester in Alaska had said build it and the paperwork can be dealt with later. MR. STONE stated the largest lode gold producer in the history of Alaska was the AJ gold mine. The AJ gold mine was incorporated in 1897 and began production in 1891. The south ore body was open pit mined originally and later on it was mined underground. In 1917 a very large mill was completed which was originally designed to handle 8,000 tons of ore a day. He noted there were a lot of technical problems with the mill and it took years to work the problems out. By 1924, the mill could handle 13,000 tons of ore a day and was employing 1,000 workers. MR. STONE said the grinding medium was steel or cast iron balls inside of a rotating mill called a ball mill. He noted the AJ gold mine was the first major gold deposit ever developed using this technology. The veins in the AJ deposits are a series of veinlets. He stated the white quartz is where the gold is contained and the surrounding country rock is essentially barren. He stated the veinlets could not be mined individually, so they took it all out. The veins are fairly high grade but when mixed with the host rock, the gold becomes low grade. He pointed out it takes about 20 tons to get an ounce of gold out of the AJ deposit. MR. STONE showed a hole where 55 million tons were taken out. After running the ore through the mill, it was sorted with 55 percent going through the mill for fine grinding and recovery of the gold and the remaining course waste was placed in Gastineau Channel at what is now known as the AJ rock dump. He stated there are about 35 million tons placed on the AJ rock dump. MR. STONE explained the ore body is over a three mile strike length. He showed areas where almost 100 million tons were mined. He said the deposit extends from 3,000 feet above sea level to 1,000 feet below sea level. In the late 1920s, the deep deposit of the north ore body was discovered. He showed a hoist which was used to haul up to 6,000 tons of ore a day from the deep levels (1,000 feet below sea level) up to the main level which is underground at 440 feet above sea level. Number 375 MR. STONE stated in the mid-1930s, concerns over the size of the rock dump forced a different form of disposal of the course waste rock. Permits from the war department were received to place the waste rock in specific areas along Gastineau Channel and Taku Inlet. Barges would hold 750 tons each. A tug would take the barges out to a predesignated site, a man would get off the tug and get on the barge, open a valve, get back on the tug and a few minutes later the barge would flood and flip over. The bottom of the barge was exactly like the top, the water would automatically siphon out, and then it would go back for another load. He explained throughout Juneau and in the downtown corridor, about 30 percent of the town is filled in with AJ mine course rock. He showed several areas in Juneau which are tidelands filled in with AJ mine rock. MR. STONE reiterated the AJ mine ran from 1891 to 1944 when it shut down due to gold being frozen at $35 an ounce, lack of manpower, and high taxation. The mine had produced 3.5 million ounces of gold and 2 million ounces of silver, out of almost 100 million tons of ore, mining 13,000 tons a day. The mine employed 1,000 people and was the largest underground gold mine in the world in its day in terms of the amount of rock mined on a daily basis. The mine was Alaska's largest lode gold producer. He stated the mine provided the territory of Alaska, during the winter months, with half of its income from taxation. Number 416 MR. STONE said the proposed AJ mine project was to mine 22,500 tons a day by Echo Bay. He stated 1,000 ounces a day would be produced or 365,000 ounces a year. The amount of gold produced in 1993 by the state of Alaska in total was 191,000 ounces and the AJ mine would produce 365,000 ounces. He noted that Echo Bay has invested in excess of $80 million on the project to date. In order for Echo Bay to bring the mine into production, an additional $300 million will need to be spent. Echo Bay acquired the lease for the property in 1985 from the city and borough of Juneau and AJT Mining Properties, Inc., which is related to the power company in Juneau and is an investor owned utility. Since 1985, Echo Bay regained access, reviewed the historical records, conducted feasibility studies, developed an environmental impact statement and is still in the middle of permitting. Number 435 MR. STONE stated one of the interesting aspects about the project is that Echo Bay has developed a number of recreational opportunities. Echo Bay envisions building a visitor center that will support the tourism industry and also has an obligation to develop an archival center for the historic records which are extensive. He showed an artist's conception of the project as it would be located at Sheep Creek. He said the old historic design of the AJ mine would be used. He mentioned that many of the artifacts to be shown have never been seen by the public before. MR. STONE commented on the Kensington venture which is a 50/50 joint venture between Coeur Alaska and Echo Bay. The Kensington mine was a past historic producer, on a very limited scale. The mine had problems with recovery of the gold because it is a complex ore body, but today there is technology available to do that. Echo Bay acquired a 50 percent interest in the Kensington project in 1987. Since then, Echo Bay has established access, built a camp, identified ore reserves, done a feasibility study, and has spent $40 million, along with the partner's share of $40 million. He stated Echo Bay will need to spend an additional $80 million to bring the mine into production. The Kensington mine will be a 4,000 ton a day operation. It is a higher grade ore body so Echo Bay will produce 500 ounces a day or 190,000 ounces a year, almost equal to the 1993 production throughout the state of Alaska. He showed what the camp at the Kensington mine looks like today. Number 470 MR. STONE stated the AJ mine will employ approximately 450 people with a payroll of $21 million and the Kensington mine will employ 340 employees with a payroll of $19 million (due to the remoteness, a lot of overtime will be paid). Echo Bay has a commitment to hire locally--will hire Juneau first, Southeast second, and statewide third. Echo Bay has established a training program with the University of Alaska. The goods and services purchased in Juneau annually during construction would be $15 million a year for the AJ mine and $6 million a year at Kensington. During ongoing operations that total would be $44 million a year at the AJ mine and $19 million a year at Kensington. He stated the city will get a royalty from the AJ mine of between $3 million and $3.5 million a year; property taxes of $4 million a year for the AJ mine and $1.5 million a year for the Kensington mine; sales taxes on local purchases would be $1 million for the AJ mine and $.5 million for the Kensington mine; state corporate and mining license tax would be $5 million a year at the AJ mine and $2.5 million a year at Kensington. MR. STONE said Echo Bay is strictly a gold company and that is their primary interest. He stressed the AJ mine and the Kensington mine are Echo Bay's two key projects being developed today. Echo Bay has a number of other projects being looked at throughout North America, as well as in Latin America and Africa. Number 497 CO-CHAIRMAN GREEN noted for the record that Representatives NICHOLIA, MACLEAN, and WILLIAMS had joined the committee. REPRESENTATIVE EILEEN MACLEAN wondered what Echo Bay wants the legislature to act on. MR. STONE stated he is not asking the legislature to act on anything. He said he was present merely to inform the legislature as to the status of the two projects. CO-CHAIRMAN GREEN recalled when Mr. Stone was talking about the Round Mountain project, he mentioned a heap leach. He wondered what a heap leach is. MR. STONE responded a heap leach process is a process that was developed in the late 1970s where a weak cyanide solution is sprinkled on top of very low grade ores and the gold is dissolved, allowing recovery. He stated the heap leach process was an economic process developed for very low grade ore bodies which are typically open pit mined. Number 519 REPRESENTATIVE SCOTT OGAN stated he thoroughly enjoyed the presentation. He noted Mr. Stone was not asking for anything, but he wondered if there is anything the legislature could do to help get these projects going. MR. STONE stated at this point it is premature for the legislature to be doing anything. He felt Echo Bay's issues are with obtaining federal permits and Echo Bay hopes to work closely with the federal agencies to obtain those permits. REPRESENTATIVE OGAN questioned if any resolutions would help. MR. STONE stated no and he would hate to see the legislature spend much time on such a thing. CO-CHAIRMAN GREEN recalled Mr. Stone had indicated that $80 million had been spent on the AJ mine. He wondered if Echo Bay has seen progress and asked if there is a reasonable expectation the necessary permits will be received. MR. STONE responded Echo Bay would not spend these monies if they did not feel there was a serious potential for success. He stated Echo Bay has established its commitment by investing these monies. He noted that Echo Bay's budget this year for the AJ mine project is $13 million. CO-CHAIRMAN GREEN noted the statistics which Mr. Stone had presented were very impressive, especially in a down-turned economy. He asked if Echo Bay has any idea when it might receive all of the necessary permits. MR. STONE stated Echo Bay has a scheduled meeting with the Environmental Protection Agency (EPA) and the Corps of Engineers on February 27 and a variety of options to address their concerns will be discussed, as well as concerns of citizens in the community. He felt some sort of schedule should be developed at that time. CO-CHAIRMAN GREEN thanked Mr. Stone for his presentation. HRES - 02/22/95 ALASKA MINERALS COMMISSION PRESENTATION Number 570 EARL BEISTLINE, CHAIRMAN, ALASKA MINERALS COMMISSION (AMC), stated he will introduce other members of the commission who are present, give a brief review of the January 1995 Alaska Minerals Commission report, and answer questions. He said the report shows members of the commission and members of the staff. The commission is composed of 11 people by virtue of state law. The composition of the committee is made by three entities. The Governor appoints five members, the Speaker of the House appoints three members, and the President of the Senate appoints three members. He explained that members of the commission are required to have at least five years experience in the mining industry within the state. MR. BEISTLINE noted the commission meets three or four times a year in various communities, various topics are discussed, and testimony is received from industry, agencies and other people interested in any particular project. The overall format of the report is shown on page 1. He explained the format and stated for each recommendation there is a topic, findings, and then a recommendation. He noted in some cases a recommendation will be directed towards the Governor, legislature or the appropriate federal agency. MR. BEISTLINE stated the type of recommendations are varied throughout the report and reviewed them. Number 644 REPRESENTATIVE MACLEAN noted the commission recommends that the Governor and legislature should invest $5 million per year for the next decade. She wondered what would be accomplished with that investment. MR. BEISTLINE said the overall purpose of the geophysical and geological mapping is to find out more about the mineral resources in the state. He stated this is the number one step for private industry to come in and do the additional work necessary, such as what is being done now by Echo Bay. He noted money has been given the past several years for this project. As a result, there are indications that mining companies have taken interest. The most recent example of a study being open is the Circle Mining District in the Fairbanks area. MR. BEISTLINE explained the original thought on this recommendation was that it would take $50 million to take care of the entire state. When money has been received in the past, certain areas have been reviewed. He noted this priority has come from the Division of Mining in the Department of Natural Resources (DNR). REPRESENTATIVE MACLEAN noted another recommendation deals with the Alaska National Interest Land Conservation Act (ANILCA). She asked Mr. Beistline to explain further "the State should assert an access route pursuant to Title XI of ANILCA..." MR. BEISTLINE responded the state has identified hundreds of potential revised statute 2477 Rights-of-Way and the commission recommends that the state should aggressively assert all of the RS 2477 routes which have been established. He said the 2477 routes come from a federal regulation which allowed access into certain areas over the public land of the state. To do this there would normally be a trail or road which would get into the area to allow people in to do their work related to the mineral industry. He stated that federal law was repealed several years ago. However, the thought is these trails or roads continue to exist and the state should take positive action to guarantee that in the future, there will be access into these key areas. TAPE 95-22, SIDE B Number 000 REPRESENTATIVE MACLEAN wondered why it is necessary to go through Title XI of ANILCA to test the process. MR. BEISTLINE responded Title XI is a process which never has been workable in the eyes of the people who have tried to get the routes established confirmed. He said the issue becomes more important because of the ownership of Alaska land. REPRESENTATIVE MACLEAN said if the regional corporations do not want RS 2477 to be crossing the paths of regional corporation lands, why would the commission want to pursue this recommendation. MR. BEISTLINE stated it would probably be desired to have development take place for the benefit of the regional corporation so there would be access and stimulate industry to come in. MR. BEISTLINE introduced members of the commission present. Number 084 HAROLD NOYES, MEMBER, AMC, stated in regard to the RS 2477 rights- of-way, there are several areas which could be asserted on state lands as well as across Native lands. He noted that Native corporations have a different viewpoint on whether or not there is a need for an RS 2477 to cross Native lands. CO-CHAIRMAN GREEN noted for the record that Representative BARNES had joined the committee. REPRESENTATIVE MACLEAN said if Native corporations want to develop their lands, they will do it on their own time. She felt RS 2477 would have an adverse impact to regional corporation lands. NEIL MACKINNON, MEMBER, AMC, stated even though there is a focus on Native lands and ANILCA with the RS 2477, there are broad areas in the state which are private in-holdings, surrounded by federal lands and state lands. He said there are some claims north of Juneau which are surrounded by federal lands and the RS 2477 has been used to get the U.S. Forest Service to issue a road permit. Without that permit, a road would not have been possible, which would have hindered the development of the property. He noted there are private lands the RS 2477 crosses but that is weighed against the fact it is a public access easement. He questioned if the developer cannot get to it, what good is it. He pointed out in the case of Native lands, it would depend on where the lands are and what lands were involved. He stressed if there are ten sections of land and it is not possible to cross the one section of federal land, the ten sections are worthless. MR. MACKINNON said the Title XI of ANILCA is so cumbersome that when the Red Dog mine was developed, it was easier to get an act of Congress to allow the road from tidewater to the Red Dog, than to go through Title XI of ANILCA. He stated in the case of the Red Dog, the Native corporations had the power to persuade Congress to do that. He pointed out other citizens and corporations in the state do not have that power. Number 153 REPRESENTATIVE RAMONA BARNES asked in regard to the Red Dog mine, if there was a land swap needed before the road could be put in. MR. MACKINNON said that was correct. REPRESENTATIVE BARNES noted that not in all cases would the state or private in-holdings have land to swap with the federal government in order to have a road to access their property. She said the state only has until August to identify all the RS 2477 rights-of-way. CO-CHAIRMAN GREEN stated he was not sure the deadline but said there is a limited time. MR. MACKINNON thought the deadline was August. He said the federal regulations are in limbo but are onerous. He noted the state has done a great job in the past two years identifying and building the case for some of the assertions. REPRESENTATIVE MACLEAN stated she likes all the recommendations in the AMC report except for number three. REPRESENTATIVE PETE KOTT invited Representative MacLean to co- sponsor item number four and five. REPRESENTATIVE BARNES noted recommendation number seven regarding Citizens Advisory Commission on Federal Areas. She said prior to the time of the Federal Land Use Planning Commission, there were two agencies who could interact with the federal government on the problems in Alaska with federal areas. Now the state only has the Citizens Advisory Commission on Federal Areas which has been short funded the last few years. She felt that commission is one of the most effective commissions the state has. Number 229 REPRESENTATIVE KOTT said it was his understanding that the make-up of the commission does not change often. He wondered what happens to previous recommendations. MR. BEISTLINE responded past recommendations are reviewed and sometimes recommendations are included from year to year. He noted the purpose of the commission is to bring out points which will stimulate resource development, particularly the minerals. AL CLOUGH, STAFF, AMC, stated if one takes a broad look at the AMC report, it is not a mining and geology report but is a regulatory report. He noted the legislature and the Administration continues to talk about jobs. He pointed out the minerals industry is ready, willing and able to provide jobs but is blocked by a regulatory system that is a circular system. He stressed it is not a linear system. He said the industry is willing, ready, and able to make adjustments, commitments and changes but what is needed from the state and other supervisory groups is a linear system. MR. CLOUGH noted that Mr. Stone had failed to mention that because Echo Bay is stuck in the permit process currently, they are going to be forced to lay off some of their crew beginning in about a month. The certainty of permits is what is stifling any kind of development in the state and he gave several examples. He complimented Representative Williams and Representative Kott for their efforts in legislation introduced this year to help the industry. He said he gets calls regularly from people trying to invest in Alaska in the minerals business and their question is not on where to go to look for minerals but it is will the local political regulatory environment allow a project to move forward after a lot of money has been invested. Number 343 REPRESENTATIVE MACLEAN asked someone to explain the recommendation on page 7, 16 b. She stated she loves mining but if the commission wants to go through RS 2477, she recommends using railroads instead of roads. DON STEVENS, MEMBER, AMC, said this recommendation refers to the "no more" clause in ANILCA where Congress said they would not designate any more conservation units in Alaska and the commission is trying to hold Congress to their commitment. REPRESENTATIVE MACLEAN asked Mr. Stevens to explain conservation units. MR. STEVENS responded those units are national parks, national monuments, wildlife refuges, etc. MR. BEISTLINE asked each commission member present to comment on any points they wished. MR. STEVENS said when hearing Mr. Stone's presentation, he was again reminded that Echo Bay is the flagship of the mining industry in Alaska. Echo Bay has great projects. However, the time it has taken Echo Bay to get their permits and get through the environmental impact study, etc. is being watched by the rest of the industry. He noted Echo Bay has at least another two years to get all their permits, which is not acceptable to the mining industry. He stated if a company goes to several other countries, permits for similar scale projects can be received much faster. He stressed it is not to the credit of Alaska that it takes so long to get the permits required. There is a need for regulatory reform. CO-CHAIRMAN GREEN said many of the problems Echo Bay has experienced are federal related. He wondered if there are any specific state problems the legislature could address. MR. CLOUGH said the water quality regulations could make a significant difference, not just for Echo Bay but anybody working with water. He stressed there has to be a reality check in the system. MR. MACKINNON stated one of his projects was ready for drilling when it was discovered there was a need for a discharge permit for the drill wastes, which delayed the project for 60 days. He made comments on how difficult it is for small mining projects in the state. CO-CHAIRMAN GREEN stated the same problem is occurring over and over in other industries. MR. CLOUGH gave another example of the problems being experienced. He noted there is a Canadian mining company trying to restart a lead/zinc/silver/gold operation up the Taku valley in British Columbia. This mine operated in the 1950s. He said the cheapest, most effective and most reasonable way to supply that mine was as it was done in the 1950s--bringing supplies up and down the Taku River into Alaska, giving the majority of the infrastructure and jobs to Alaskans. He noted when he met with the company over a year ago, he counseled the company on avoiding anything in the state which required a permit because they did have an option of running their supplies through British Columbia, up through the Yukon. Fortunately, the mineral concentrates most likely will be hauled down the Klondike Highway to the port of Skagway. MR. CLOUGH commented on the mine training program. He said by the time the Greens Creek Mine was fully operational, over 80 percent of their work force of 240 people were trained through the mine training program. MR. NOYES stated much of his time is spent promoting mineral development on Native corporation lands. He stressed it is a very competitive environment. He said the points issued in the report will go a long way towards improving the environment for mining companies to explore in the state and help generate employment and investment in the state. He commented on the airborne geophysical program which has generated interest by mining companies in the state. He noted the Fairbanks Industrial Development Corporation will be requesting funding for a program in the Interior for several old mining districts which have not had much modern work done in them. He felt the airborne program would go a long way towards inspiring new interest in the area. MR. NOYES noted the Fairbanks Industrial Development Corporation is requesting $1.5 million for that program. He said if that is done in the next year, hopefully in one to three years after that an equivalent amount of money would be invested by industry. Number 519 REPRESENTATIVE JOHN DAVIES wondered what the source is for the money the Fairbanks Industrial Development Corporation is seeking. MR. NOYES said he did not know. REPRESENTATIVE DAVIES questioned, in regard to recommendation number two on page one of the report, what foundation funding was being referred to. MR. NOYES stated the original idea was to have a fund of money which would continuously fund the airborne surveys, allowing long range planning for the program, so systematically the most attractive parts of the state could be evaluated. REPRESENTATIVE DAVIES said he did not understand the recommendation as it relates to investing $5 million. MR. CLOUGH responded the idea was if a dedicated fund were set up in the amount of $50 million, the interest could allow an investment of about $5 million a year for a 10 year period to implement this program. At the end of the program, the principal could be used for something else or it could be rolled over for an ongoing, broad-based mineral investment. He reiterated the need for the airborne survey program. He said the initial return is straightaway. The long term return, if this program helps facilitate the discovery of a major mine, pays back many times over the modest investment. MR. CLOUGH stated the commission wants to see if there is a way for the legislature to institutionalize this program. He said there is nothing magic about $5 million and 10 years--it is just one way to look at it. He noted it can be an ongoing program that can be slowly moved across the entire state and added that the program involves no cost to maintain. He pointed out the data is just as good 50 years from now as it is today. He noted reports from the turn of century are still being used. Number 576 MR. MACKINNON said a recent magazine article featured worldwide mining. He noted that geophysical and geological mapping has been done in those nations featured and is being advertised. REPRESENTATIVE DAVIES felt the airborne surveys is something that is appropriate for the state to do. He felt if private enterprise is going to be encouraged, the ground work has to be laid. REPRESENTATIVE BARNES wondered how aerial mapping affects geophysical mapping. She asked if it helps identify where there is mineral potential. MR. NOYES stated it does. He said aerial mapping provides a basic geological map showing different types of rock units. He added that in some cases, it can identify characteristics which specific mineral deposits have. He felt it was a very useful guide. REPRESENTATIVE BARNES wondered if the entire state had been mapped. REPRESENTATIVE DAVIES said only a few percent of the state had been completed. MR. BEISTLINE read several of the other recommendations contained in the AMC report. TAPE 95-23, SIDE A Number 000 MR. BEISTLINE noted everyone is concerned with the state budget and sometimes reductions have to be made but at the same time, it is important to keep those entities going which will produce jobs and the economy in the future. He stated the development of resources is quite important. He expressed appreciation to the committee for inviting commission members to attend the meeting. Number 048 CO-CHAIRMAN GREEN thanked the commission members for their presentation and complimented them on their report. CO-CHAIRMAN BILL WILLIAMS asked Mr. Noyes to get more information for Representative MacLean on the access problem which she had concerns about. MR. NOYES said he would be happy to do so. HRES - 02/22/95 CSSJR 6(RES) - TRANSFER FEDERAL LAND TO POST-1802 STATES Number 105 JOE AMBROSE, AIDE, SENATOR ROBIN TAYLOR, PRIME SPONSOR, stated the idea of the resolution goes back to what has become a federal doctoring of public domain and in the process resulted in 22 states of the Union not on equal footing with the remaining states because they do not own the property within their borders. He said in response to a question at the last hearing, a zero fiscal note approved by the Senate has been provided to committee members. Number 120 REPRESENTATIVE BARNES said the military bases in Alaska include many acres of land. She clarified under this resolution it will be suggested that the federal government buy the land presently held for military bases. MR. AMBROSE replied yes. He noted the Constitution provides for the sale of property for arsenals, forts, and other needful buildings to the federal government with the consent of the legislature. REPRESENTATIVE BARNES stated she would like to see that happen but with the military shutting down bases all over the country, she would not want to ask the federal government to buy the land from the state because she is afraid the federal government would shut down those military bases. MR. AMBROSE said there was a bill introduced in the last session of Congress which started this process and provided for the return of federal holdings within the states with exceptions such as military bases and national parks. Number 164 REPRESENTATIVE MACLEAN expressed opposition to CSSJR 6(RES) because she feels it is a back door approach to attack the subsistence problem. She said she would rather have the federal government taking care of the state's subsistence on navigable waters rather than the state, in light of the fact that the state legislature is not even willing to consider a constitutional amendment to subsistence. REPRESENTATIVE DAVIES stated the fiscal note given to committee members is not responsive to the question he asked at the last hearing on CSSJR 6 as it is an estimate for fiscal year 1996 only. He cannot conceive that anyone would conclude that there are no costs associated with this resolution. He stressed this fiscal note does not represent reality in respect to the proposal. REPRESENTATIVE BARNES made a MOTION to MOVE CSSJR 6(RES) with accompanying zero fiscal note out of committee with individual recommendations. REPRESENTATIVE NICHOLIA OBJECTED. CO-CHAIRMAN GREEN asked for a roll call vote. Voting in favor of the motion were Representatives Austerman, Kott, Ogan, Barnes, Williams, and Green. Voting against the motion were Representatives MacLean, Davies, and Nicholia. The MOTION PASSED 6-3. ADJOURNMENT There being no further business to come before the House Resources Committee, Co-Chairman Green adjourned the meeting at 9:40 a.m.