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The Future of Mining in Alaska

Challenging times with tremendous potential


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In my role at Alaska’s trade association representing the mining industry, I am frequently approached with inquiries all bearing the same theme: “How are things in the mining industry?” Especially in today’s environment of low commodity prices, reduced state and federal government spending, and layoffs in the multi-industry support sector, Alaskans and Americans are interested in learning what the future of mining may look like and how the industry may impact the economy.

In preparation for an upcoming presentation I plan to deliver, I recently polled approximately fifty AMA (Alaska Miners Association) members, ranging from diverse backgrounds within the mining industry, to obtain broad answers to the following three questions:

 

  • How is the mining industry changing globally and in Alaska?
  • How is your company responding to any affects felt by the lower price of oil?
  • What are the biggest obstacles facing the mining industry in 2016?

 

I was awed with the extent of similarities from every single response I received. Miners that operate in Alaska, and many of whom represent entities with operations all over the world, described the same challenges and opportunities, ideas and experiences, and predictions for the future of mining in Alaska.

I will be honest with you, readers. It is a particularly challenging time in the mining industry. Globally, the industry is experiencing hurdles and facing even larger ones in coming years, and belt-tightening is occurring at varying levels of operations and businesses. Here at home, every Alaska miner knows the hurdles I speak of. The downturn in worldwide mining activity is being felt in all areas of the industry.

 

Industry Rocked by Prices

A sharp decline in commodity prices has, well, rocked our industry in the past year. At the time of writing this column, both precious (gold, silver) and base (zinc, lead) metals have seen prices plunge by 25 percent or more. Meanwhile, the operating costs have not dropped. This has squeezed the profitability of existing mining operations, and now many companies are operating under extremely conservative budgets. Some companies have begun to eliminate any excess or discretionary costs (which unfortunately results in reductions in workforce), cutting new project spending almost entirely, performing exploration activity only close to existing operations, and administering financial management to reduce debt and maintain cash flow.

With a discouraging revenue situation, investors are looking towards jurisdictions with a timely return on investment, i.e., a reasonable permitting regime. That’s not to say companies are looking for a swift approval process for mining projects. However, project timelines have evolved such that today it could take a large mining project one to two decades to complete permitting and be constructed in the United States. Large development projects, as many know, are evaluated under the NEPA (National Environmental Policy Act) process, a process under which hundreds of factors must be examined and decided upon by the project proponent, numerous state and federal regulatory agencies, the general public, and policymakers. A mining project that completes the NEPA process has undergone review of hundreds of environmental, safety, human health, wildlife, cultural, and socioeconomic issues throughout its duration. The process has been hailed by national environmental advocacy groups and welcomed by resource developers alike.

 

Numerous Barriers

However, the barriers that come before, during, and after NEPA are so numerous that I pray my high school English teacher never reads this article and sees the run-on sentence I must print to describe the situation. Quite frankly, the disconnect of the American public (and increasingly, the federal government) between our dependence on mined products and the stringent environmental standards applied to US mining projects has resulted in an increasing perception that mining is “bad.” This disconnect is the root cause of unrealistic regulatory burdens on mining projects; hostile anti-development campaigns that use Alaska as a fundraising tool and are not held accountable for their distribution of misinformation; frequent and frivolous litigation against companies and regulatory agencies for every minor permit decision throughout the process which significantly delays project decisions; ballot measures creating arbitrary laws against resource development projects; and a general media that doesn’t accurately portray or bother to truly investigate technical mining issues. I’d better stop there, although I could go on, as I am truly afraid Mrs. Hensley from Bartlett High School will see this and wonder where she went wrong with me.

The extensive list of barriers is a fairly graphic description as to why Alaska does not enjoy a first place ranking among jurisdictions that provide a timely return on their investment.

 

Federal Regime

Many will argue that perhaps an even larger challenge than low commodity prices are the increasing unpredictable, unreasonable, and unjustified actions by the federal government relating to the regulatory process. I can again commit a massive grammatical faux pas when providing examples of changes within our federal permitting regime that make mining more difficult without added environmental benefit. This is particularly true for Alaska’s placer miners—in many cases, federal land managers and permitting agencies have made major changes in requirements that necessitate more paperwork, create more expense, and impose more restrictions with no justification and no existing problem requiring correction. Even worse, some changes have prescribed methodologies for how miners should operate, when in many cases, miners with multiple generations of experience have attested the methods are negatively impacting the environment.

I could fill this entire issue with examples of the punitive and unreasonable federal regulation changes this country is seeing, and again, it is causing those considering investing in our country, and in our state, to think twice.

 

Tremendous Potential

Please, don’t let me leave you with the sole impression of gloom and doom. I and many others believe that the mining industry is cyclical and that our future is bright, even if we are in a different place today. Mining has a fantastic reputation to Alaskans—the general public, lawmakers (including our state administration and Legislature as well as our Congressional Delegation), and the permitting agencies based in Alaska look favorably upon the mining industry’s stellar track record of environmental responsibility, safety, and community support. The industry and educational community has adopted a commitment to make workforce development a priority, and training entities are focusing on identifying labor needs across all industries. Finally, Alaska remains a shining star in one very vital category: the mineral potential in the state, both explored and not, is quite simply tremendous. The opportunities for world-class mineral deposits in Alaska remain attractive to the global mining industry, and at some point, I believe the challenges will be resolved and Alaska will be a prominent investment destination.

AMA will hold its Annual Convention the first week of November at the Dena’ina Center in Anchorage. The issues discussed in this article, and many more, will be examined over the course of the week. We’d love to have you there with us. Please visit alaskaminers.org for more information.

 

 

This article first appeared in the November 2015 print edition of Alaska Business Monthly.  

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