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Donlin mine moves slowly toward reality

Craig Medred

Imagine a huge open-pit mine is proposed in the headwaters of a major salmon stream in wild, Western Alaska. Development plans call for a sea of toxic waste to be stored behind a dam awaiting treatment. The mine presents the potential to create problems with acid runoff from massive piles of tailings. Fears are raised about the danger that poisonous cyanide could be spilled at the site. Environmentalists question whether emissions from high-temperature autoclaves could pump noxious methyl mercury into the sky to later rain down on the surrounding countryside.

And then it is suggested the revered and undeveloped Iditarod National Historic Trail might need to be torn up in order to lay a pipeline to haul gas 320 miles north from Cook Inlet to fuel a huge new electric power plant to process billions in gold at the mine.

The latter will have clued most in to the fact the mine in question here is not the well-known Pebble -- subject of incessant television and radio propagandizing from critics and proponents in Alaska. By now, even 49th state cave dwellers have heard the claims that Pebble will be either a huge source of environmentally safe jobs and business opportunities for an economically depressed corner of the state -- or an environmental disaster. "They get the gold; Alaskans get the toxic waste," as one commercial ominously portrays the future.

Suffice to say that "contentious" would be a fair way to describe the Pebble prospect not yet close to being a mine, something the Pebble Partnership keeps trying to point out as if that somehow makes a difference. The issue at Pebble is that there could someday be a mine in the headwaters of one of Alaska's major salmon drainages.

But then, a very similar situation exists at the barely noticed Donlin Creek prospect 225 miles to the north. Donlin is a tributary to the 724-mile long, resource-rich Kuskokwim River -- the longest free-flowing river in the United States. The Kusko, as it is commonly called, is home to all five species of Pacific salmon plus the fabled Alaska sheefish, the so-called "Tarpon of the North."

Development at Donlin carries many of the same risks and rewards as development at Pebble, and yet Donlin has been moving forward largely unopposed for more than a decade. Both environmentalists and developers agree on the main reason why: money.

As economist Karl Marx long ago observed, everything is economics.

Donlin has attracted little attention, said Pam Miller, executive director of Alaska Community Action on Toxins, because "unlike Pebble, there aren't the wealthy lodge owners. There's just poor subsistence residents."

Wealthy lodge owners might be the ultimate in NIMBY opposition to backyard development. They are extremely well connected, given their clients tend toward well-off businessmen and the idle rich. These are the kind of people with the connections that enable them to get major jewelry retailers to make public-relations claims they will never use Pebble gold in their products, even if it's hard to trace any gold used for jewelry back to its original source.

Take this power block, couple it with downstream commercial fishermen who hold valuable Alaska limited entry fishing permits for Bristol Bay salmon and a millionaire neighbor running an investment fund worth billions, and you have a power bloc that can make life hell for any sort of development.

Donlin faces no such opposing lobby. There are no wealthy lodge owners near Donlin, no well-off commercial fishermen downstream, and no millionaire neighbor. This, Miller said, has helped the project move forward almost in silence. She doesn't think that's right.

"It's a terrible environmental injustice," she said. "It's a terrible environmental disparity."

Stan Foo, the former manager of the Donlin development, would disagree with Miller on the issue of justice and disparity. He believes Donlin can be developed in an environmentally safe manner that could produce hundreds of jobs in one of the most economically depressed corners of North America. But he agrees about the influence of money.

Bristol Bay lodge owners, commercial fishermen and Bob Gillam of McKinley Capital Management, which is reputed to oversee about $20 billion in investment, are making life miserable for Pebble. On the other hand, an army of unemployed Western Alaskans needing work have backed Donlin development.

Foo isn't involved in the day-to-day workings of Donlin anymore. He is now the Alaska representative for Barrick Gold U.S. Inc., which is a partnered with NovaGold Resources Alaska Inc in Donlin. But Foo knows the history of Donlin as well as anyone.

It is a history all but invisible to most Alaskans. Though the Donlin gold deposit valued at $20 to $30 billion is a lot closer to development than Pebble, many Alaskans have only the slightest knowledge of the work underway there for about 12 years. Few could find Donlin on a map. Few would even know where to look. (Hint: It's near the community of Crooked Creek between Aniak and the well-known gold-mining ghost town of Iditarod in the Interior.)

Foo said Donlin's location might have had something to do with the project avoiding much of the contention that has surrounded Pebble. The mine sits in a historic mining district as opposed to the watershed of the most famous salmon fishery in the state. But there's to more to it than that.

"I think the key is we're situated on Calista lands," Foo said.


Calista Corp. is the regional Native corporation the Alaska Claims Settlement Act created for the lower Yukon and Kuskokwim rivers. The second largest of 13 regional corporations formed after the U.S. government settled aboriginal claims in Alaska, its 13,000 shareholders were among the resource poorest. Seeded with $80 million in settlement money in 1971, the corporation was down to $4.2 million in cash before it started to turn things around.

So-called government 8(a) contracts, which allow subsidiaries of Alaska Native corporations to sidestep competitive bidding rules to obtain sole-source government contracts for all sorts of businesses have, in recent years, helped Calista climb $125 million into the black. But the 8(a) contracting provisions that give Alaska Native corporations preferential treatment do not last forever. They are designed to eventually disappear.

Calista needs investments for the future.

Donlin, if it ever goes into operation, could prove a solid money-maker for the corporation, plus offer one thing most 8a subsidiaries don't -- local jobs. Under Calista's watchful eye, Donlin has worked hard at not only hiring locals but training people so they can get hired. A NovaGold prospectus claims "local hiring and training programs have resulted in 90% local hire from the region."

The Anchorage-based Foo, a guy green enough to be a die-hard cross-country skier, was one of those involved in making the local hire program work for Donlin. Jobs created by Donlin exploration, he believes, made life better for many in Southwest Alaska.

"You really appreciate seeing people have the opportunity," he said. "This is one of the most impoverished areas in the state and in the nation."

Out on the Yukon-Kuskokwim Delta, the promise of even more jobs in a full-scale mine is a powerful incentive for local support. Even the independent Bethel-based Association of Village Council Presidents has bought into Donlin, and AVCP is a tribal organization that has in the past largely dedicated itself to protecting a subsistence hunting and fishing lifestyle that could be threatened by mining in at least two ways.

The first, and most obvious, is environmental degradation. Through accident or oversight, the mine could pollute the Kuskokwim River. The second and more likely threat stems from the jobs themselves. People with money can buy better tools for hunting and fishing -- like snowmobiles and riverboats -- which make them more efficient. The historic legacy of development in Alaska has been overfishing and overhunting followed by years of severe restrictions on any hunting and fishing to try to rebuild fish and game populations. During construction of the trans-Alaska oil pipeline, simple recreational fishing -- so-called sport fishing -- so depleted some lakes and streams along the pipeline corridor it took decades for fish populations to recover.

Still, anyone who has gone without money for long understands well the value of a job, and the Donlin mine is projected to create 600 to 700 high-paying mining jobs, plus untold other jobs in the businesses that pop up to help support the mine or cater to the needs or desires of mine workers.

"It can be anticipated that the region's current welfare and unemployment payments of $33 million per year would be reduced by about one third," one AVCP report on Donlin noted. "The net present value of these savings to the state and federal governments from 2010 to 2029 would exceed $150 million."

Throw in the possibility the mine could spawn an electric power plant big enough to provide cheaper power for a good part of the lower Kuskokwim River, including the regional hub of Bethel, and Donlin just gets more attractive. Most of the villages between the mine and Bethel now get their power from outdated, inefficient diesel generators burning expensive fuel oil.

Miller worries that all these incentives toward development could power a steamroller moving the project forward without enough attention paid to the possible downside.

"People are very intimidated to stand up and speak out against the Donlin mine," she said. "The Donlin Creek prospect is, of course, not on state land, and the corporation has certainly has used that to their advantage."

Yukon-Delta Natives are one of the most cohesive groups in the state. They have clung to their history and their heritage like no others. They led a fight to force the state to print election ballots in Yup'ik and provide voter assistance in that Eskimo dialect still the main language of many in the region. They have been a prime force in battling to increase state spending on rural schools.

Politically, they recognize the power of consensus, and on Donlin there appears to be local consensus. Anyone who speaks against the project is likely to fall into disfavor or, in the case of Caucasian residents of the region, be accused of being anti-Native, a damning charge in Alaska.

"We've had people who will talk to us privately about it, but will never speak up at public meetings," Miller said. "They're afraid."

Despite this, local people have raised environmental concerns. They did not like the idea of Donlin hauling strings of barges laden with diesel oil up the Kuskokwim to fuel the new power plant that will be needed at any mine.

Most thought the danger of an accident and a spill was too high. Not to mention the disruption to local hunting and fishing that would be caused by heavy barge traffic on the river.

The prospective mine partners -- Toronto, Ontario-based Barrick and its partner, Vancouver, British Columbia-based NovaGold -- eventually decided they didn't like the idea of a diesel power plant much, either. Their main objection, however, appears to be cost. A 2008 feasibility study on Donlin concluded the project would be profitable at gold prices of $825 per ounce or higher. But the study was completed before diesel prices skyrocketed.


They have since fallen somewhat, but the U.S. Energy Information Administration projects a steady increase for the next 30 years. Thus Donlin has started talking about trying to find more stable energy sources. A possible gas pipeline from Tyonek up the Iditarod Trail through Rainy Pass and then almost due west to Donlin is now under consideration. There was a public meeting in Skwentna to discuss the idea, although the plan remains sketchy.

Kevin Keeler, the manager for the Iditarod National Historic Trail, said he has had a hard time determining how serious Donlin is about a pipeline.

"Their plan keeps changing," he said.

The proposed mine, however, needs to get power somewhere. It needs the electrical juice of a midsize city to power the equipment to get the gold out of the ground. How much gold is hard to fathom. The estimated 26.2 million ounces that can be recovered translate into more than $30 billion worth of yellow metal at today's price of more than $1,100.

But the volume of dirt that must be moved to get at the gold is equally staggering. Donlin Creek LLC proposes to rip open a pit two miles long and a mile wide, then build a nearby mill at which mechanical and chemical means would be used to remove gold from 59,000 tons of ore per day.

Such a volume of rock is hard to visualize. The legendary ore carrier Edmund Fitzgerald, a ship about two and a half football fields long, was carrying 26,000 tons when she mysteriously went down in Lake Superior. The mill at Donlin would process the cargo of more than two Fitzgeralds every day. Most of the rock would emerge from the mine as waste.

A NovaGold prospectus notes its planned high-tech mine -- the hydraulic shovels would be guided by GPS to allow ore control -- would be one of only a handful of mines worldwide capable of producing more than a million ounces of gold per year. It would also be one of the biggest producers of waste rock and a huge consumer of electricity.

"The Donlin Creek mine is expected to draw an average of 127 MW (megawatts) of power with peak loads of 152 MW," according to the NovaGold prospects. Anchorage Municipal Light & Power has a peak load of only slightly more than that; it tops out at about 180 MW.

"Project power requirements would be sourced from a combination of on-site turbine diesel generators with supplementation from wind co-generation," the company said in 2008. But it is now clearly looking for other energy sources. The gas pipeline from Cook Inlet to the mine, a power line connecting to the Railbelt grid near Nenana, and propane from the Interior shipped down the Yukon River have all been suggested in the past.

There is no telling what might be suggested in the future. Donlin has clearly hit a snag. The company announced two years ago it would be applying in the spring of 2009 for all the federal permits necessary to start moving toward development. Mark Jen, who oversees the permitting process for the Environmental Protection Agency, said he has now been told not to expect an application until at least "mid- or third quarter 2011."

"It's my understanding they're still looking at their energy needs," he said.

Doug Nicholson, the current project manager for Donlin, did not return repeated phone calls. The company has announced the recent extension of its lease with Calista. Jen said he has no idea of whether a request from Donlin to start an environmental impact statement -- the first step in permitting -- will include a study for the mine plus a power transmission system, or just the mine.

There's gold in them there hills between the Yukon and Kuskokwim rivers, but the costs of getting it out in the 21st century -- when environmental regulations make it difficult to rape, ruin and run, no matter what various environmental groups might suggest -- could remain as big a hurdle to mine development as they have been since the 1930s.

That land between the rivers, it is worth noting, remains littered with the dredges, hydraulics and buildings of the businesses that abandoned the area after the easy gold was gotten out early in the 20th century. Unnoticed in most of Alaska, Donlin might have moved a major new mine a lot closer to reality than Pebble, but it clearly still has a ways to go.

Contact Craig Medred at craig(at)alaskadispatch.com.