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The developer of the proposed Kensington gold mine is working toward a tax-exempt deal to build two ports in Berners Bay.
Coeur Alaska seeks $20 million in tax-exempt bonds through the Alaska Industrial Development and Export Authority. On Tuesday the House and Senate transportation committees approved legislation allowing the bonds. But before gaining tax-exempt status, Coeur and AIDEA must convince the IRS that the Slate Creek and Cascade Point ports will also serve the public.
The mine is about 45 miles north of downtown Juneau and inaccessible from the road system.
Jim McMillan, a deputy director with AIDEA, said if the Legislature allows the development authority to proceed with the bonds, AIDEA will ask the IRS for a determination on whether the project would fall under tax-exempt status.
He said extending the road to Cascade Point, near Echo Cove, and building that port would provide Alaskans with better access to recreational opportunities such as hunting, fishing and camping. McMillan said it might be more difficult to explain the public opportunities for the Slate Creek port, closer to the mine and inaccessible by road.
He said AIDEA has not yet determined what those opportunities might be. It could be argued that the port would be available for public use once the mine is closed.
The IRS could determine that only one port would fall under tax-exempt status, McMillan said.
Sue Schrader of the Southeast Alaska Conservation Council said AIDEA will have to "gin up some good rationale for the likelihood of public use." SEACC has opposed opening the mine.
Schrader asked why there was no discussion of public use of the ports in the project's environmental impact statement.
"It will be interesting to see how AIDEA drafts that letter to the IRS," she said.
Lawmakers in both committees questioned the $20 million authority for the two docks that are estimated to cost about $7.3 million - $4.4 million for the Slate Creek port and $2.9 million for the Cascade Point port. McMillan said the $20 million number is a preliminary cost estimate.
He said the additional bonding authority could be used to pay for cost overruns and upland improvements associated with the docks.
Any money left over from the $20 million could be used for other port projects in Lynn Canal, he said.
"Before we utilize that we would go back and talk to the Legislature," he said. "We don't want anyone to think we are sneaking around the original intent. The risk of AIDEA abusing this excess authority, I don't think it's going to happen."
Schrader of SEACC said the group has a lot of questions about the financial stability of Coeur.
"Is this a worthy partner for the state of Alaska to get involved in?" she said.
Schrader said that in April 2002, Coeur d'Alene Mines Corp., the parent company of Coeur Alaska, told its shareholders it might declare bankruptcy unless silver prices improved or its debt was restructured. At that time the price of its stock hovered between $1.47 and $1.20 a share.
Schrader said the state should be concerned that if mineral prices fall, AIDEA could be left to pay off the bonds.
On Monday Coeur d'Alene stock was at $5.10 a share.
Tim Arnold, vice president and general manager of Coeur Alaska, said the company is "in the best shape we've been in many, many years."
He said if Coeur filed for bankruptcy during the projected 15-year life of the mine, then AIDEA could use Coeur's assets to pay off the bonds. Arnold said the company has $258 million in assets.
"We at one time were a company that had financial issues," Arnold said. "That's behind us and we are now a very attractive company."
Both bills, House Bill 556 and Senate Bill 394, now head to their respective finance committees for approval.
Timothy Inklebarger can be reached at firstname.lastname@example.org.