Pebble proposal rocks state

February 9, 2007
Fairbanks Daily News-Miner (AK)
By ERIC LIDJI

The proposed site for the Pebble mine near Bristol Bay is 400 miles from Fairbanks. The debate over the mine, though, is much closer.

Groups on both sides of the issue have started local advertising and mailing campaigns, and the possible economic and legislative ramifications of the debate are making Pebble an issue for Interior Alaska, where Fort Knox is the second largest taxpayer, Pogo gold mine should be operational for years, and companies are announcing new prospects every year.

“Any of these big projects have implications around the state,” said Dave Szumigala, with the Alaska Miners Association and the state Division of Geological and Geophysical Surveys.

The Pebble Mine Project

What is it?: A proposed copper, gold, silver and molybdenum mine.

Where is it?: In the Bristol Bay region, about 15 miles northwest of Iliamna Lake.

Who owns it?: The area is state land dedicated for mining, but the mineral rights belong to Northern Dynasty Mines, an Anchorage company with large financial backing from companies in Canada and London. Rio Tinto, one of the largest mining companies in the world, recently acquired nearly 20 percent of Northern Dynasty Mines.

Why is it such a big deal to miners?: The site promises to be one of the largest gold and copper deposits in the world at a time when both commodities are near record highs. Extracting those minerals would create hundreds of jobs within the industry.

Why are so many groups opposed to it?: Getting the minerals may require constructing one of the largest open pit mines in the world. Environmentalists and commercial fishermen worry that tailings, or the waste left over from the mine, will destroy the world-class salmon run and commercial fisheries of Bristol Bay.

How far along is the mine?: Northern Dynasty Mines is conducting environmental surveys and preparing its mining application to the state, which they hope to have finished by 2008 or 2009. The state permitting process is usually no less than three years.
About Pebble

Pebble is a proposed copper, gold, silver and molybdenum mine near Iliamna Lake, upriver from Bristol Bay in Southwest Alaska.

Northern Dynasty Mines, the company behind the project, believes Pebble could become one of the largest gold and copper mines in the world at a time when both commodities are trading high. Extracting those minerals would require construction of one of the world’s largest open-pit mines.

Environmental groups and commercial fishermen worry the mine will harm the world-class Bristol Bay fishery and salmon run. They say that open-pit mining around the world has destroyed rivers and fisheries when tailings, or the waste left over from hard-rock mining, leak into waterways. The Bristol Bay ecosystem provides an average of 6,300 jobs every year and $187 million in wages, according to a University of Alaska study funded by Trout Unlimited, a trout and salmon conservation group.

The two most prominent opponents to Pebble are the Renewable Resources Coalition, a nonprofit corporation with 300 members set up to protect fish and game resources, and the Bristol Bay Alliance, a group of fishermen and other business owners in that region trying to keep open-pit mining and oil drilling away from the bay. Although Pebble has yet to start the state permitting process for large mines, these two groups have already begun a marketing campaign that includes newspaper and television ads, as well as asking jewelers to boycott gold pulled from a future Pebble mine.

Miners have known about the mineral deposits at Pebble for almost 20 years, but Northern Dynasty did not become involved with the project until 2001. In 2004, Northern Dynasty shifted from exploring the potential of the area to developing the first mine.

The debate intensified as Northern Dynasty learned it might have underestimated the mineral potential and expanded the project’s scope in 2005.

Northern Dynasty, using an independent survey from that year, estimates that Pebble might hold more than 3 billion metric tons of minerals, including 31.3 million ounces of gold, 18.8 billion pounds of copper and 993 million pounds of molybdenum plus additional silver.

The company had more than 450 people working on exploration and development at Pebble during 2005. By comparison, Fort Knox, the large gold mine northeast of Fairbanks, employs 400 workers in mine operations and has extracted 3 million ounces of gold in 10 years.

According to Sean Magee, a spokesman for Northern Dynasty Mines, the company originally thought it would need a 13-square mile open-pit mine.

However, in 2005, they discovered Pebble East, a deeper and richer deposit next to the original property. Now, he said, the company is trying to determine whether it needs a mix of open-pit and underground mines, or whether it needs any open-pit mining at all.

“At this point, we’re back to the drawing board,” Magee said.

Northern Dynasty Mines has already invested more than $100 million on the project.

Pebble has attracted statewide attention because it has the potential to change the permitting process for future large mines and the taxation method for current mines around the state.

Pebble permitting

Every large mine must go through a state permitting process before the company can start extracting minerals. Northern Dynasty has yet to go through this process, and, even if it were unopposed, is still years away from turning dirt.

“The issue isn’t really Pebble. It’s whether the state has an adequate process for evaluating mines,” said Dave Cattanach, chairman of the pro-Pebble group Truth about Pebble and president of the Association of General Contractors in Alaska.

Consistency in the permitting process is important to miners, because major mining projects require a long timeline — often five to 10 years — and large investments before the first minerals are ready to sell.

If the permitting process changes during that time, the mining company has to make mid-course adjustments that can be costly.

“People in the mining community are seeking an assurance that the process as they know it is going to stay transparent,” Szumigala said.

Mining groups worry that an extended debate before a mine starts the permitting process will discourage other companies from exploring the state, bringing new jobs and increasing a major sector of the economy.

“Alaska is competing against the world for these investment dollars,” Szumigala said.

When a company announces its intentions to start a large mining project, Szumigala said, others in the industry monitor how smoothly the process goes and keep that information in mind when deciding whether to spend money in Alaska.

Referring to the 37 months Teck Cominco needed to receive a permit for the Pogo gold mine near Delta, Szumigala said, “That’s a good time. People think we could do a little bit better.”

Environmental groups such as the Anchorage-based Renewable Resources Coalition argue the process isn’t stringent enough, pointing to the fact that Alaska has never turned down a large mine application as proof.

Shauna Mikelich, who monitors the mining industry for the Northern Alaska Environmental Center in Fairbanks, said although the permitting process includes a public comment period, the public is not prepared to handle thousands of pages of technical descriptions on a deadline.

She pointed to thousands of pages of documents for the Rock Creek mine, located near Nome, which had its permit suspended in December after citizen petitions led the Army Corps of Engineers to review the mine’s application.

“What people are concerned about is not being able to get through the paperwork in time,” Mikelich said.

Because delays are expensive, these battles preceding each large mine harm the industry, according to Eddie Packee, with Travis/Peterson Environmental Consulting Inc., which helps mining companies and individuals through the environmental permitting process.

Packee believes environmental groups use large projects as an ongoing campaign to become a permanent part of the permitting process and that they use lawsuits, like the one at Rock Creek, to stop development after permits have been issued.

While Packee agrees the industry doesn’t have a perfect track record, he said it has been responsive to change and has attempted to stay ahead of regulation because it’s good for business.

“An environmental black eye is the last thing the mining industry wants,” Packee said.

A recent set of ads sponsored by the Renewable Resources Council claims that the plans for Pebble, which include one of the largest dams in the world, are “so outrageous, they will cause Alaskans to rise up against the entire mining industry.”

Scott Brennan, executive vice president and chief operating officer of the Renewable Resources Coalition, said the problem with Pebble is site specific — a battle between fishing and mining in Bristol Bay, and a worry that one mine in the area will make it easier for more to follow. But he said that “measures taken to stop it might adversely affect other mines in other parts of the state.”

Pebble and taxes

At the same time, Brennan doesn’t believe the mining industry contributes enough to the state, and he said Pebble should start a discussion about the state of mining in Alaska.

“This is not just about habitat preservation but about government policies that go to the heart and soul of Alaska and Alaska’s future,” Brennan said.

He and others believe the mining industry is not held to the same standard as other resource-based industries, such as oil and gas. “Any time you start rumbling on about increasing taxes, that’s a big deal,” said Packee, the mining industry consultant.

Alaska charges a license fee of 5 to 7 percent on all mining production, as well as a 3 percent royalty on the net income of minerals mined from state land. The mining industry does not directly contribute to the Alaska Permanent Fund.

The desire to change mining taxes is not new, but the Pebble mine has renewed motivation in the proposal, according to Rep. Jay Ramras, a Fairbanks Republican who opposes the Pebble project but also opposes harsher taxes on the industry.

Ramras opposes the Pebble mine because he fears it would give Alaska a reputation for acting as a “poor steward” of environmentally sensitive spots and create precedent for drilling in the Arctic National Wildlife Refuge on the North Slope.

But Ramras also opposes new taxation because he believes mining contributes to local economies through property taxes and jobs, even if it does not contribute to the state permanent fund.

Ramras worries that Pebble will become the motivation needed to propel new taxation through the Legislature.

Rep. Paul Seaton, a Homer Republican, sponsored unsuccessful legislation in the past to change mining taxes and is preparing to reintroduce that legislation this year starting with a meeting Wednesday between legislators and mining industry leaders.

Seaton’s previous legislation sought to steadily increase the mining production tax over several years and make the production royalties cover gross income instead of net income.

“This is much broader than Pebble, it’s mining industry reform throughout the state,” Seaton said.

Pebble’s legacy

The Pebble mine’s greatest outcome might be in motivating coordinated efforts on either side.

Truth about Pebble connects the mining industry with helicopter services, real estate developers, photographers and general contractors concerned about how the mine’s outcome reflects on business as a whole in Alaska.

On the other side, Mikelich with the Northern Alaska Environmental Center, said groups such as the Bristol Bay Alliance prove the viability of a relationship between commercial fishermen and environmental groups.

“If nothing else, Pebble has shown that reaching out to a bunch of diverse groups, that you can achieve amazing things,” Mikelich said.

Contact staff writer Eric Lidji at 459-7504 or elidji@newsminer.com

Date: 2/9/2007