Read For more than a decade, changes have occurred each year that have improved the regulatory and business climate for mining in A text version

Overview of NovaGold Resources' Donlin Creek gold project in Alaska. The view is looking west at the camp and the airfield. The ACME deposit is in the valley on the right side of the photo. (Photo courtesy of NovaGold Resources.)

For more than a decade, changes have occurred each year that

have improved the regulatory and business climate for mining in Alaska. These changes have taken place during Republican and Democratic governorships as well as when the state House of Representatives and Senate were controlled by either party. During some years, the changes have been relatively minor. In others, including the 2003 legislative session, the changes could only be characterized as massive. These improvements have encouraged exploration. This, in turn, has resulted in some major new discoveries. But Alaska is essentially unexplored and tremendous opportunities remain. The author has often described this process as one of repairing a gravel road. In some years, basic grading and repairs to potholes have been made. In others, culverts have been replaced or new guardrails installed on some dangerous curves. On a few occasions, major bridges have been replaced or major overpasses constructed. Throughout that process, we have watched for and replaced foundation material to minimize future problems. The road is still a gravel road. It still has curves and rough spots that need repairs and upgrades but it is of much better quality than it was before. Like any gravel road, it requires annual maintenance and diligence to ensure it does not deteriorate.

Historical reference

It is well known that Alaska has a tremendous mineral endowment. Gold was the primary focus of the early prospectors and pioneers. From the 1800s until World War II, mining was the largest industry in Alaska. And it provided more jobs than any other industry. To understand the forces that have shaped the industry and the current status of mining in Alaska, a historical review is necessary. In 1847, Russian explorers first discovered gold at the Russian River on the Kenai Peninsula. This was followed by minor discoveries elsewhere. The first major discovery, though, occurred in 1880 when Chief Kowee, a local native, showed Joe Juneau and Richard Harris some placer gold near what is now Juneau, Alaska's capital. By Steven C. Borell, 1886, the Treadwell Mines in that area were the largest Member SME, is executive underground gold mines in the director of the Alaska Miners Association, 3305 world. This was 10 years before Arctic Blvd, No. 105, the Klondike gold rush began in Anchorage, AK the Yukon Territory. 99503, e-mail In 1898, the "three Lucky [email protected] Swedes" discovered placer gold at Nome. In 1902, Felix Pedro

discovered gold on Pedro Creek near Fairbanks, just over the ridge from what is today the Fort Knox Mine. Depending on how they were counted, there were 13 major gold rushes in Alaska between 1880 and 1913. By 1916, there were 52 dredges and 32 railroads operating in Alaska. Of those, 44 of the dredges and 18 of the railroads were on the Seward Peninsula. However, the pivotal point for the current Alaska mining industry was World War II. As noted earlier, from the late 1800s until the war, mining was the largest industry. However, from World War II until 1989 there was effectively no hard-rock mining in the state. At the start of World War II, a presidential order closed all precious metal mines in the United States. The expertise of the miners was needed to produce lead, zinc, copper and iron. The equipment from the nation's mines was needed to build military bases, airfields, ports, pipelines and roads. After the war, some placer mining in Alaska resumed as did limited lode exploration as prices allowed. There are several reasons for the slow resumption in the industry. For base metals, there was tremendous excess production capacity throughout the world. During the war, mines were expanded and developed to feed the tremendous appetite for metals, often with lesser concern for economics. After the war, these mines were fully capitalized and operating. They could easily provide all of the metal required for the post war economy. Regarding gold, the government was the only buyer and the price was still set by law at the pre-war level of $1.12/g ($35/oz). However, costs for wages and supplies had been increasing throughout the war and many mines were now uneconomic. As a result, some placer mining resumed but there was effectively no lode mining. There have been other major factors. In 1968, the Prudhoe Bay oil field was discovered. It was the largest ever found in North America. Alaska became focused (some would say drunk) on oil. This ushered in a period of land tenure uncertainty. The Figure 1

need for a right of way for the oil pipeline provided an opportunity for Alaska Natives to force settlement of their aboriginal land claims. This settlement resulted in the Alaska Native Claims Settlement Act of 1971 (ANCSA) and settled once and for all time the aboriginal land claims. During the debate about ANCSA, there was much pressure to establish more federal conservation system units, such as parks, preserves and refuges. There was also pressure to designate additional "wilderness" under the Wilderness Act of 1968. However, this issue was so complex and divisive that no agreement could be reached. To address this unresolved matter, Section 17(d)(2) was added to ANCSA . It committed Congress to continue working on the issue. The ensuing process took nine years and became known as the d(2) lands debate. It culminated in the passage of the Alaska National Interest Lands Conservation Act of 1980 (ANILCA). ANILCA placed 42 million hm2 (104 million acres) of Alaska into various types of conservation system units. ANILCA also removed most of the remaining land tenure questions. Another factor affecting Alaska's mineral development was that the state was held to a higher environmental standard than the rest of the country. This was partly because the amount of money surrounding oil development was so much greater than mining that the oil patch was willing and able to pay any price to get through the permitting process. This set the floor for other industries. However, in 1989 two major mines began operating in Alaska. In February, the Greens Creek Mine started up and in November the Red Dog Mine began operations. These mines proved that not all of Alaska was in a park and that major mines could be permitted here. Thus began the modern era of mining in Alaska.

Improvements by the year

The steps that have brought the mining industry in Alaska forward are too numerous to describe in this article. The one constant, though, is the improvement of the regulatory and business climate for mining in Alaska. These changes have occurred during the administrations of both major parties. Figure 1 shows these improvements. Some years the changes have been minor while in other years they have been huge. Making these changes has required a lot of effort by the Alaska Miners Association working with other trade associations, several state administrations and legislatures. The normal decline of oil production due to maturation of the Prudhoe Bay oil field has helped, too. This decline has caused Alaskans to seek diversification of the economy. For most areas of the state, that means taking valuable metals out of the rocks. In 1971,ANCSA is the starting point for describing the improvements to the business and regulatory climate. Before ANCSA's

passage, the mining industry was generally opposed to Natives advocates for development of Alaska's mineral resources. The owning large areas of Alaska, especially when the Natives mining industry is able to speak in unison would be allowed to select the lands with the highest oil and gas regarding environmental requirements, permitting, access across and hard mineral potential. federal lands, power, roads and ports. Having this common Except for a few national parks and wildlife refuges, all of purpose is a benefit to the entire mineral industry, whether on Alaska at that time was public land. It was managed by the U.S. state, federal or private land, including private Native lands. Bureau of Land Management or the U.S. Forest Service and was These native corporations now have more than 30 years of open to mineral entry. That meant the state was open to claim experience with minerals deals. They are professional in their staking and all of the rights associated with mining claims. This approach and know what is feasible for themselves and a included the ability to patent the land if a valuable mineral potential lessee. deposit was found and a stringent and lengthy set of requirements could be met. When the mining industry compared Changes to Alaska's business climate the existing land status and land tenure rules with the prospect of The following discusses by year some of the actions and Alaska Natives owning huge areas of high-value mineral lands, changes that have improved the regulatory and business climate the industry opposition was understandable. for the Alaska mining industry. However, as we look back today many, including this writer, believe that ANCSA is the single most important event 1985 -- Alaska Industrial Development and Export for the modern mining in Alaska since Secretary Seward bought Authority (AIDEA). This state office was given tax-exempt the Territory from Russia. Under ANCSA, the Alaska Natives bonding authority and a mandate to support resource were allowed to select 17.8 million hm2 (44 million acres). development by involvement in the development of roads, ports These native corporations worked hard to choose those lands and other infrastructure. with the best mineral potential. These lands are owned feesimple by the native corporations and a mining company 1986 -- Alaska Minerals Commission. This commission was becomes a lessee, as with any other private land. ANCSA settled established to provide an annual report to the governor and the the aboriginal land claims. So that issue is closed. legislature with recommendations for changes to statutes, Also of significance, there is no U.S. Bureau of Indian regulations and policies that will benefit mining. Affairs (BIA) trust involvement with Alaska native corporation lands. This point is important because, unlike most Native 1987-1990 -- AIDEA at Red Dog. This provided $180 million American lands in the rest of the United States, Alaska native tax exempt financing to build the Red Dog corporations are free to negotiate their own agreements without road and port (Delong Mountains Transportation System). The BIA oversight. funds would then be paid back through usage fees. The Red Dog Mine is the best example of how ANCSA has facilitated minerals development. NANA is one of the 13 native 1988 -- Alaska Mineral Policy Act. This act formalized regional corporations. If NANA had not Coeur Alaska's proposed Kensington project is located about 56 km (35 miles) from Juneau. selected the Red Dog area, the region The view is looking north across Berners Bay. (Photo courtesy of Coeur Alaska.) would surely have been forever locked up in Cape Krusenstern National Monument. More importantly for all Alaska Natives, Red Dog has shown what high quality, local jobs can mean for families and communities. Before Red Dog, northwest Alaska had the highest unemployment rate in the state and all of the personal and societal ills that accompany that situation. Red Dog brought jobs, personal satisfaction and the hope that results when people can get off government welfare and provide for their families. And, due to the provisions in ANCSA that require revenue sharing between the regional corporations, each regional corporation has received a portion of the revenue generated by the Red Dog ore deposit. The result is that today when it comes to developing mineral deposits, the native corporations have the same priorities as others in the industry. And the corporations are powerful, effective

Aerial view of Northern Dynasty's proposed Pebble project. Photo shows the induced polarization anomaly with the known Pebble deposit in the background. (Photo courtesy of Northern Dynasty.)

from the DGGS at Web site 1993 -- State land selections. The final 10.1 million hm2 (25 million acres) of land selections were made under the Alaska Statehood Act. About 78 percent of the lands were selected for hard mineral or for oil and gas potential and many other lands were selected to provide surface access corridors. · AIDEA at Fort Knox. It provided $75 million conduit financing for the Fort Knox tailings dam. · Department of Natural Resources (DNR) as lead agency for mining. The statute states that the DNR is the lead agency for mining.

the encouragement of mineral development as a policy of the state. 1990 -- Mine Reclamation Act. This act established the standard as "reclamation to a stable condition that will allow natural revegetation in a reasonable period of time." It requires financial assurance, establishes a bonding pool and includes incentives to encourage concurrent reclamation. In addition, the act includes "hammers" if miners do not perform and it allows miners not on state land to use the bonding pool. · AIDEA at Skagway. AIDEA provided $25 million in taxexempt financing to build the Skagway Ore Terminal. Those funds are paid back through usage fees. 1991 -- In-place taxation of resources. The law was changed to eliminate this taxation option. · Shallow gas/coalbed methane. The law was changed to clarify that the first-in-time lessee of coal or coalbed methane has the preferential right over a subsequent lessee. 1992 -- Definition of state land. Changed definition to facilitate conversion of federal mining claims to state ownership of the land and guarantee federal claimants' ability to securely convert to state mining claims. · Annual airborne geophysical survey. The state established an ongoing program of annual geophysical surveys focusing on specific areas with high mineral potential. Depending on the objectives and the rock types, these surveys provide results for one or more of the aeromagnetic, electromagnetic and radiometric data. The surveys are managed by the Alaska Division of Geologic and Geophysical Surveys (DGGS). The data is available in hard copy and electronic format for a nominal cost. The listings of all available surveys are available

1994 -- Administrative closures of state land to mineral entry. Limits were set so that not more than 260 hm2 (640 acres) can be closed to mineral entry without approval by legislature. · Mental Health Lands Trust. This settled conflicts about these pre-statehood state lands. · Annual airborne geophysical surveys. The DGGS released surveys for the Nome west, Circle, Valdez Creek and Nyac areas. 1995 -- Exploration Incentive Act. This act established an exploration incentive program. The Act's provisions include: up to $20 million tax credit per project; must be project specific; applies to exploration and permitting costs until final the permit is received; becomes an asset that stays with the project; and is taken as a deduction against royalties and taxes due to the state. · Annual airborne geophysical surveys. The DGGS released surveys for the Fairbanks and the Richardson areas. 1996 -- Restrictive Work Law. This law removed the eighthour-at-the-face limitation on underground mines. · Pro-mining attitude. This kind of attitude in the Calista Region resulted in an agreement being signed with Placer Dome for the Donlin Creek project. · Annual airborne geophysical surveys. The DGGS released surveys for the Rampart/Manley area. 1997 -- Improvements to the Exploration Incentive Act. These changes simplified reporting requirements. · Tort reform. Improved tort law. · Shallow gas/coalbed methane. Clarified rules and set the fees. · Annual airborne geophysical surveys. The DGGS released surveys for Rampart/Manley, Chulitna, Broad Pass and Petersville. · Minerals Data and Information Rescue in Alaska (MDIRA). This program began a process to preserve and increase public accessibility to mineral data, files, samples and other information from the

former U.S. Bureau of Mines (USBM) and other sources, including private sources (the Anaconda Collection) so they would not be lost. This information included reports and maps; raw data, including geochemical, geophysical, core and other samples; and unpublished work by the USBM, the U.S. Geological Survey, state agencies, geologists and engineers. The program would link libraries, archives and theses; upgrade, modernize and automate links between recorder's offices, state claim records (including land-status plats), federal claim records and state land records. All of the above information would be Web accessible at Some private and nearly all publicly held Alaska minerals data and land records are available through this single the Web portal. 1998 -- Business incentive program. Established an incentive program for new businesses. · Annual airborne geophysical surveys. The DGGS released surveys for Ruby and Iron Creek. · MDIRA. Continued the program. 1999 -- Denali Commission. This commission was established by Congress and the state to assist in the funding and the construction of facilities in rural Alaska. · Agency fees. A fee system removed uncertainty by codifying a process for establishing agency fees. · Annual airborne geophysical surveys. The DGGS released surveys for Livengood and Fortymile. · MDIRA. Continued the program. 2000 -- Modernize state mining law. Some changes aimed at modernizing Alaska's mining location law included removing the 400-m (1,320-ft) limitation length for sidelines and allowing

claims to be located by global positioning systems. Each claim is uniquely defined by meridian, township, range, section and claim (MTRSC). The law also allows both 16-hm2 (40-acre) and 65-hm2 (160-acre) claims when in MTRSC format and also allows nonMTRSC claims, as originally provided in the law. · General permit for temporary, remote camps. Established a general permit for permitting temporary remote camps. · Codified 590 RS-2477 rights-of-way. Asserted rights-of-way into the state statute. · Annual airborne geophysical surveys. The DGGS released surveys for Salcha River/Pogo. · MDIRA. Continued the program. 2000 -- Delta Mine Training Center. This center was established at Delta Junction. It provides training for local residents and others to work at the Pogo underground gold mine and to work in positions to support expanded mineral exploration throughout the state. · MDIRA. Continued the program. 2002 -- Established a temporary water right. This program facilitates rapid development where water is needed for only a short period of time, as in building ice roads. · Removed the ACMP petition process. Removed a redundant appeal step. · Established general permit. This was established for water and waste water disposal. · Annual airborne geophysicalsurveys. DGGS released surveys for Chutlina, Broad Pass, Salcha River/Pogo and Liberty Bell. · MDIRA. Continued the program. State and federal

Area map of Teck Cominco's Pogo project area.

Preconstruction of the surface facilities at Tech Cominco's Pogo project. The view is to the northeast. (Photo courtesy of Tech Pogo.)

mining claim records, including some recorder's office copies, are made available online by interactive map through site.

Time to permit large mines in Alaska

These changes sound good, but have they actually benefited the industry? The answer is yes, in several ways. Alaska has become a location of choice for several major and junior mining companies. The result has been the discovery of many new ore deposits. And at least four areas may actually become districts, not just individual mines. These areas include: · The area north and east of Delta Junction, which includes Pogo. · The area north and west of Lake Iliamna, which includes the Pebble project. · The area north and west of Parson, which includes the MAN project. · The known but undeveloped historic Iditarod district, which includes the Donlin Creek project. Additionally, the Red Dog area already is a new district and several more orebodies have been located there since Red Dog began operating in 1989. Another measure of the improvements that have been made in Alaska relates to the time it now takes to permit a mine. A summary of permitting times for the most recent, large projects compares favorably with permitting in other states and other parts of the world. Furthermore, the U.S. legal system is preferred to many parts of the world. And, except for the occasional grizzly bear, security concerns for staff and facilities is not an issue. Recent permitting times in Alaska: · Fort Knox and Illinois Creek -- Each took 18 months to complete the environmental assessment. · True North -- Nine months to complete the environmental assessment. · True North Expansion, which doubled the size of the

2003 changes in first session of the 23rd legislature with Gov. Frank Murkowski

· State/BLM memorandum of understanding on bonding. Established a memorandum of understanding to allow mines on BLM lands to continue using the state bonding pool. · Large project permitting office. Established the Office of Project Management and Permitting (OPMP) within the DNR to manage the permitting process for major resource development projects. · Fish and Game Habitat into the DNR. Transferred the Fish and Game Habitat function into the DNR. The Habitat Division had been a major stumbling block for decades. · Division of Governmental Coordination (DGC). This office was eliminated. The DGC did not and could not "coordinate" and had been an impediment to permitting. · Alaska Coastal Management Program (ACMP). This program was transferred into the DNR. Changes were made to properly define the ACMP authority and process. ACMP had been allowed to expand its requirements to include "homeless stipulations" that were not found anywhere in state law. · Public interest litigants. So-called public interest litigants are now required to pay expenses when they challenge (and lose) an agency decision that has been through a public comment process. · Frivolous permit challenges. Penalties were established for frivolous challenges. · Punitive damages against employers. A provision was removed that had allowed punitive damages against employers. · Annual airborne geophysicalsurveys. The DGGS released survey of Council, Sleetmute and Southern Delta River. · MDIRA. Continued the program.

pits -- Six months to complete the environmental assessment. · Pogo -- Three years and one month to complete a full environmental impact statement (EIS). This included about six months for the redesign of the mine. The project manager had estimated that the permitting process would take three to four years. · Kensington -- The original EIS took three years, six months, then the gold price dropped. The first Supplemental EIS took 15 months, then the gold price dropped further. The second Supplemental EIS was begun in March 2003 and is expected to have a record of decision in the spring of 2004.

Tech Cominco's Red Dog zinc-lead mill and tailings impoundment facilities. The pit is located beyond the fuel tanks at the right side of the photo. (Photo courtesy of Tech Cominco.)

Opportunities for the future

When the improvements and resulting permitting times are added to the Alaska mineral endowment, the opportunities for the future are tremendous. For gold, there are 58 mining districts in Alaska that have had historic gold production. Most of that production has been placer gold and the lode sources have not yet been found. Table 1 lists seven mining districts that have each had more than 31.1 t (1 million oz) of gold production. Of these, only two -- Fairbanks and Juneau -- have lode gold production today. In

the McGrath-Innoko District, Illinois Creek is in final reclamation and closure and Nixon Fork is being evaluated for restart. In the Nome and Iditarod districts, Rock Creek and Donlin Creek are being evaluated for economic feasibility. There are another seven mining districts that have produced between 15.5 t and 31.1 t (500,000 and 1 million oz). These are shown in Table 2. There are many areas of Alaska that have seen gold production at some time in the past. But the lode sources have not yet been found. In addition to World War II and other issues, minimal rock exposures in many areas due to vegetative cover, forest or ice and a lack of roads have made exploration more difficult. That was in the past before the advent of modern geophysical techniques and newer geologic models. The 14 mining districts listed in Tables 1 and 2 are now obvious targets for modern gold exploration. The same reasoning can be applied to base metals. The future for Alaska mineral development is better than it has ever been. Alaska has about 40.4 million hm2 (100 million acres) of stateowned land that are open to a mining law based on self-initiation, discovery and location. The state also has 17.8 million hm2 (44 million acres) of private Native lands that are open to leasing. And there is another 19.8 million hm2 (49 million acres) of federal land that is open to the location of mining claims under the federal mining law. Lastly, in Frank Murkowski, Alaska has a governor who understands resource development and a group of department commissioners who have new-resource development as their top priority.


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