Mining payback gets cold shoulder

Posted: Sunday, May 04, 2003

A bill that would divert royalties, rents and some taxes paid by mines back to the industry is likely to die in committee for lack of support.

Hearings on House Bill 87 were postponed twice last week, and the bill is scheduled to be heard Monday in the House Resources Committee.

The bill would create a mining infrastructure fund consisting of the state's share of royalties, rents and the mining license tax. Altogether, the state's mines have paid about $16 million annually in recent years, but more than half of that has gone to municipalities. In 2001, the state received about $7 million, said Bob Loeffler, the director of the Department of Natural Resource's Division of Mining, Land and Water.

The state must allocate a quarter of the money it receives from the mines to the Alaska Permanent Fund, said Mark Gnadt, staffer to Rep. Eric Croft, the Anchorage Democrat who sponsored the bill.

And the Alaska Miners Association contends that what's left over after the municipalities and permanent fund get their share is not enough to build any real infrastructure.

"This bill will not materially help the mining industry, and may actually hurt the industry," said Steve Borell, the organization's executive director.

Borell said some of that revenue is used for the operation of the Division of Mining, Land and Water, and said the loss of that money would be detrimental to the industry. He also said he worries that the creation of an infrastructure fund would make it more difficult for the industry to receive other funds from the Legislature or the state.

But Gnadt said the bill was partly intended to allow the heavily subsidized mining industry a little bit of self-sufficiency.

"What we were trying to do was give them some way of saying they're paying for themselves ... to say, 'Hey, this money we do bring in, we should be able to use it for things that help our industry grow,' " he said.

Gnadt said the funding the Legislature appropriates for the industry is usually just a fraction of what it really needs.

The second part of the bill has to do with wastewater disposal, and would prohibit the state from forcing mines to return water to a river or stream cleaner than when it was removed. In practice, the Department of Environmental Conservation makes exceptions to water-quality standards when the stream to which the water is being returned contains a naturally higher level of minerals or ore than the standards allow, said Tom Chapple, director of DEC's Division of Air and Water Quality.

"It basically says that we can accommodate a high natural condition for a given pollutant," Chapple said.

Croft's bill would make that regulation law.

Mara Bacsujlaky, the assistant director of the Northern Alaska Environmental Center in Fairbanks, said her organization isn't supporting or opposing the bill. She said she doesn't have a problem with the wastewater portion of the bill.

She said that although she feels the fund would create a further subsidy to the mining industry, she thinks it would be helpful in creating a tracking system for how much money the industry is contributing.

"It's very difficult to get figures into how much they're paying in mining license tax. There's a lot of credit that they are allowed to take," she said.

Mines are assessed royalties of 3 percent of their net profit, a license tax of 7 percent of their profit, and a corporate income tax of 9.4 percent, Loeffler said, but they don't pay the full amount because of a variety of deductions. The corporate income tax would not go into the fund.

Masha Herbst can be reached at

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