Skip to main Content

Members of public voice concerns in Red Dog Mine tax dispute

  • Author: Shady Oliver
  • Updated: September 30, 2016
  • Published February 14, 2016

Since Teck Alaska, which operates Red Dog Mine in the Northwest Arctic Borough, sued the borough in superior court in January, stakeholders across the region have been voicing concerns about the ramifications of the potential outcomes of negotiations.

For the last two decades, Teck has paid the borough through a renewable payment in lieu of taxes (PILT) agreement, which most recently expired at the end of last year. On Jan. 1, the borough initiated a municipal severance tax, which if allowed to continue, would raise the amount of money paid out to the borough from Teck annually.

Teck took the matter, and the borough, to court, claiming the tax is illegal. The borough, as a home rule government, believes it is fully within its rights to enact a severance tax.

The borough maintains it needs the additional funds for schools, public safety and other municipal efforts. Teck has stated that if the tax remains in place, it could jeopardize the mine's ability to continue operations.

At the most recent regular meeting of the Northwest Arctic Borough Assembly, members of the assembly and the public spoke out about the tax proposal, predominantly in favor of it.

"The borough wants Teck to continue to be profitable but not at the expense of the borough," said Assembly President Nasruk Carl Weisner, citing costs associated with public safety, education, water and sewer. "If necessary, we're going to have to gear up and (go to court). I like the idea of cooperation but as far as I'm concerned I'm not going to get dictated to for the terms of an agreement."

The borough has maintained that when it initially negotiated the PILT agreement, it did so with the understanding that the lower payments would help stimulate development and support the new and untested project at Red Dog. Now that the mine has proven itself profitable, it's time to renegotiate, according to the borough.

Assembly member Miles Cleveland, of Ambler, told a story to illustrate this point.

"When my grandfather accepted a .22 rifle, he made a change for my life and your life. Now he has to buy bullets for that gun that he accepted," he said. "In today's world, we still live in that era. We're making changes for our children and we have the power to do that, big time. We need to start exercising our power and walk the talk. This is part of us. This is why we're here. Times have changed. We can't go back 20 years from now and take it up back there. We need to go forward, always."

During the public comment period, resident Colleen Swan, of Kivalina, raised concerns about funding for the villages, where costs are often higher and services fewer.

"I thank the borough for considering all the issues of the villages. We have a lot of issues. And it's very important that the borough seek more funding that will go to the villages. People are suffering. We don't have services that people deserve. You have the power to change things. We don't have to suffer. It's time to do that now and I hope that we will get the services out of the money that comes from the severance tax," she said.

Across the board, when assembly members expressed support for the borough's position with regard to the severance tax, they cited public needs that aren't currently being met that could benefit greatly from increased payments to the borough.

"So, understanding the borough's position that they're facing this fiscal crisis and they're trying to raise revenue, like any municipal organization should, the concern that we have is it could be a short-term windfall and this severance tax could deter future sustainable resource development opportunities that the borough could benefit from long term," said Liz Cravalho, senior director of community and government affairs with NANA Regional Corp.

NANA stands as the other major stakeholder in these negotiations and has tried to run a middle line between the borough and Teck. NANA, which owns the land on which Red Dog is situated, acknowledges the fiscal responsibilities of the borough but maintains it hopes to facilitate clear communication between both parties moving forward.

"NANA's position on this is we see both perspectives and our goal is to bring both parties together to reach a reasonable agreement or a path forward that benefits the region and our shareholders," Cravalho said. "Our alternate goal is to get both parties together for structured mediation so both voices are heard and we can find that Goldilocks number and we can move the situation forward."

In December, NANA sent an official letter to both the borough and Teck, encouraging them to engage in third-party mediation, to be conducted not by NANA but by an outside mediator. According to NANA, one party accepted while the other did not. They did not share which party was which.

"We have a history of collaboration and cooperation on many issues including this and I think that's what we're focused on now -- our relationship with both parties," Cravalho said.

As a regional corporation, under the Alaska Native Claims Settlement Act, NANA shares a portion of its payments from Red Dog with other corporations across the state.

It stands to lose revenue from the mine if the severance tax goes forward, which would in turn reduce the amount paid out through the ANCSA sharing provisions.

In fiscal year 2015, NANA received $187.3 million in net proceed payments from Red Dog, of which it distributed $114.1 million in sharing payments. Since it began receiving NPP from the mine in 1989, it has received $1.3 billion, of which it has retained about a third -- $480 million -- and distributed $820 million across the state.

Last year, the mine employed 603 shareholders, some of whom have come forward expressing concerns about the sustainability of the mine, should the tax go forward.

"The concerns that I have heard have been related to jobs at the mine site, potential impacts to dividends, but also potential impacts to future responsible resource development projects, even the ability to evaluate them, or to see if it's something that we can pursue," Cravalho said. "This industry needs a stable regulatory regime and this severance tax destabilizes that -- financial projections of potential future resource development projects. Those are the things I'm hearing from shareholders."

Back in the assembly, Vice President Lucy Nelson, of Kotzebue, noted that the borough has a responsibility to ensure benefits for all of its citizens, not any one demographic.

"What I wanted to remind our residents is we don't just serve tribal members and we don't just serve NANA shareholders. We serve residents of all colors. Everyone has needs, whether you're white, Eskimo, all different races we serve," Nelson said. "We're tasked with a huge responsibility to meet the needs of all the villages and the villages have needs, economic opportunities are not always available in the villages. We have to stand united. We have a huge fiscal responsibility and making sure we make the right decisions on our finances is important to me."

The borough has stated that although Teck has said the multibillion dollar mine may no longer be viable if the tax is upheld in court, Red Dog is profitable enough that it wouldn't seem to be a sound decision to close it based on increased payments between $20 and $40 million per year.

"We have to ride the tide and make sound fiscal decisions. We have power. We have to use it and that's our task moving forward," Nelson said.

Teck maintains the mine's future isn't guaranteed.

The borough has until Feb. 29 to respond to Teck's complaint in superior court.

This story first appeared in The Arctic Sounder and is republished here with permission.

For more newsletters click here

Local news matters.

Support independent, local journalism in Alaska.