Legislature ups scrutiny of mining industry

Posted: Saturday, February 16, 2008

Some lawmakers are calling for a revision of Alaska's mining tax code, which they say is outdated and doesn't give the state's citizens the best return for their resources.

Michael Penn / Juneau Empire
Michael Penn / Juneau Empire

House Bill 156 is one of several bills up for debate in the upcoming regular session of the Alaska Legislature that could have repercussions for the mining industry. Other bills include efforts to protect water quality or restrict the ability to mine in certain areas.

The tax bill's prime sponsor, Rep. Paul Seaton, R-Homer, said it's important to review how the state taxes the mining industry because mining has changed over the decades in Alaska.

"It used to be that it was pretty much small, mom-and-pop mines, and now it's large multinational corporations," Seaton said.

Currently, mining royalties are paid based on net profits. The bill proposes calculating the state's royalties based on the value of what's extracted minus smelter and transportation costs, called the "net smelter return." The method would reap larger returns for the state.

Rep. Jay Ramras, R-Fairbanks, said he's determined to keep the mining industry from being "taxed into extinction."

"I think there's an appetite to get our fair share and I suspect the hungry are going to turn to mining next," Ramras said. "I'm going to be just as opposed to taxing the mining industry as I was to the oil and gas industry."

Seaton said the bill is a necessary update for Alaska to receive a fair value for the minerals extracted in the state.

Steve Borell, executive director of the Alaska Miners Association, said the current tax structure works "perfectly" now, as evidenced by the record $172 million paid by the industry to the state and municipalities in 2006.

He said a "net smelter return" would have disastrous effects on the industry, and would make many projects unprofitable.

Other bills before the upcoming Legislature are aimed at protecting water quality around spawning salmon, according to their sponsors.

Rep. Bryce Edgmon, D-Dillingham, said his House Bill 134 is currently being revised after the Fisheries Committee held hearings on it in Dillingham this fall. The bill aims to prevent the dumping of polluted water into streams where salmon spawn near Bristol Bay.

"There was strong support for HB 134 as a concept but local residents were concerned that the bill in its present form might have unintended consequences, that it might curtail local development that uses water," Edgmon said.

Sharon Leighow, spokeswoman for Republican Gov. Sarah Palin, said the governor does not support the bill on mine taxes or the one on water quality in their current forms.

Borell said HB 134 and Senate Bill 67, which would create a game reserve in the Bristol Bay area, are "bad bills" that, if passed, would certainly block the Pebble Mine.

Two years of exploration have been completed at the site of the proposed Pebble Mine, and the outer boundaries of the mineral deposits have not been found yet, making it one of the largest copper and gold deposits in the world.

The mine is being developed by Northern Dynasty Mines, an American subsidiary of Northern Dynasty Minerals, a Canadian company. The mine's value is estimated at several hundred billion dollars.

The mine sits at the headwaters of two major drainages for Bristol Bay, the most productive sockeye salmon fishery in the world.

That has Edgmon, a commercial fisherman, worried not only for the health of the fishery, but also any threats to worldwide consumers' perception of the "wild and untainted salmon" coming from the area.

Edgmon said the Pebble Mine is the white elephant in the room at the Legislature. He said the project will test the limits of the regulatory process and drive an examination of the state's laws regarding mining.

"I question that the regulatory process is strong enough to ensure that the largest sockeye fishery in the world will be ably protected given the close proximity of one of the largest mineral deposits worldwide," Edgmon said.

Another bill aims to undo some policies of former Gov. Frank Murkowski, who loosened rules that allow a business to meet water quality standards by diluting pollutants in stream areas called "mixing zones."

House Bill 74, also sponsored by Seaton, would ban such practices year-round in areas where salmon spawn. Current rules ban such practices only when the salmon are in the stream.

Borell, of the Alaska Miners Association, said the bill would be onerous for the industry.

"It's misleading to think that mines are the potential problem," he said. "Mines are going to be managed far more carefully than any municipal discharge."

He said such mixing zones involve minute amounts of pollutants that within a few feet or few hundred feet of entering a stream are not detectable at a level that violates any laws.



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