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Title
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Eng
Bristol Bay and the Pebble Project: Red or Gold
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Date
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2008
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Creator
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Eng
Cunningham, Kelly J
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Subject
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Environmental Studies
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extracted text
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BRISTOL BAY AND THE PEBBLE PROJECT:
RED OR GOLD?
by
Kelly J. Cunningham
A Thesis: Essay of Distinction
Submitted in partial fulfillment
of the requirements for the dual degree
Master of Environmental Studies/Master of Public Administration
The Evergreen State College
June 2008
This Thesis for the Master of Environmental Studies Degree
by
Kelly J. Cunningham
has been approved for
The Evergreen State College
by
________________________
Amy Cook, Ph.D
Member of the Faculty
________________________
Date
ABSTRACT
Bristol Bay and the Pebble Project:
Red or Gold?
Kelly J. Cunningham
The issue before Alaska’s decision makers cuts to the core dilemma of the
human enterprise: the conflict between the distribution of costs and benefits It
boils down to two conflicted and highly polarized schools of thought. Proponents
of approving the Pebble Project’s copper and gold mine cite the need for more
jobs for local residents; transportation infrastructure to provide additional
economic stimuli and reduce the high cost of energy; and an economic base that
provides stability-stability that could exceed one hundred years or more. Those
opposed to Pebble object to the scope and scale of the project not to mention the
potential environmental issues that have been associated with mining elsewhere.
They argue that the world’s largest run of wild sockeye (Oncorhynchus nerka) or
“red” salmon as they are commonly referred to in Alaska, have sustained Bristol
Bay’s human and wildlife populations for millennia and continue to do so by
providing the economic backbone for not only the region, but entire state as well.
They contend that the toxics produced by the mine will contaminate the watershed
and destroy the Kvichak and other rivers important to salmon.
In addressing this dilemma it is important to have a firm understanding of
the eco-region, Pebble’s proposed plans, and how those plans may negatively
impact the environment. In addition, this thesis hypothesizes that an economic
gap exists between the two options and quantifies the financial benefits of both
the proposed mine and healthy, sustainable fisheries for consideration by decision
makers regarding this difficult issue. Taken to the extreme, the controversy can be
summarized by asking what is more valued-the world’s largest wild sockeye
salmon run, or the world’s second largest gold deposit? Or, put more simplywhat is your favorite color, red or, gold?
Table of Contents
List of Figures
List of Tables
Acknowledgements
Part I. The Bristol Bay Eco-region
v
vi
vii
Page 1
Chapter 1. Alaska’s Bristol Bay Region
Landscapes
Adjacent National Parks and Refuge
Wildlife Habitat
Chapter Summary
Page 2
Page 2
Page 6
Page 8
Page 10
Chapter 2. Bristol Bay’s Sockeye Salmon
Oncorhynchus nerka Behavior and Ecology
The Bristol Bay Sockeye Populations
The Kvichak River Sockeye
Chapter Summary
Page 11
Page 11
Page 13
Page 14
Page 16
Chapter 3. Bristol Bay’s Economy
Demographics
Subsistence
Government Employment and Payments
Commercial Fisheries
Sport Fisheries
Regional Economic Development
Chapter Summary
Page 17
Page 17
Page 20
Page 22
Page 23
Page 27
Page 29
Page 30
Part II. The Development Dilemma
Page 32
Chapter 4. Alaska’s Mineral Resources
Resource Extraction in Alaska
Northern Dynasty Minerals, Ltd.
The Pebble Partnership
Economic Benefits of Pebble
Chapter Summary
Page 33
Page 33
Page 35
Page 36
Page 39
Page 41
Chapter 5. Mining and the Environment
The Open Pit Extraction Process
The Underground Extraction Process
Milltown Dam Case Study: A Century of Mining
Alaska and the Toxics Release Inventory
Chapter Summary
Page 42
Page 42
Page 44
Page 46
Page 54
Page 55
iii
Table of Contents
continued
Chapter 6. The Policy Dilemma
Red or Gold?
The Pebble Plan
Chapter Summary
Page 56
Page 56
Page 57
Page 66
Chapter 7. The Economic Gap
Quantifying the Choices
Chapter Summary
Page 67
Page 67
Page 73
Chapter 8. Additional Considerations
Recommendations
Conclusion
Page 74
Page 74
Page 77
iv
List of Figures
Figure 1.
Bristol Bay Regional Map
Page 2
Figure 2.
Alaska Vegetation Distribution
Page 4
Figure 3.
Alaska National Parks
Page 6
Figure 4.
Katmai and Lake Clark National Parks
Page 8
Figure 5.
ADF&G South Central Management Region
Page 9
Figure 6.
Bristol Bay’s Major Sockeye Producing Rivers
Page 13
Figure 7.
The Kvichak River Watershed
Page 15
Figure 8.
Bristol Bay Regional Communities
Page 18
Figure 9.
Bristol Bay Subsistence
Page 21
Figure 10.
Bristol Bay Commercial Fishing Districts
Page 24
Figure 11.
Major Mining Activity In Alaska
Page 34
Figure 12.
Pebble Mineral Deposit
Page 37
Figure 13.
Butte Montana’s Berkley Pit
Page 42
Figure 14.
Block Caving Subsidence
Page 44
Figure 15.
Proposed Road and Pipeline
Page 58
Figure 16.
Pebble Mine Operations
Page 59
Figure 17.
Rivers Directly Threatened
Page 60
Figure 18.
China’s 3 Gorges Dam
Page 63
Figure 19.
Alaska Earthquakes 1975-Present
Page 64
Figure 20.
Alaska Wind Classification
Page 75
v
List of Tables
Table 1.
Bristol Bay Local Government Jobs
Page 23
Table 2.
Bristol Bay State Government Jobs
Page 23
Table 3.
Bristol Bay Sockeye Harvest
Page 25
Table 4.
Bristol Bay Resident Crew Members
Page 26
Table 5.
Bristol Bay Processing Employment
Page 26
Table 6.
2006 Seafood Processing
Page 27
Table 7.
Alternatives Considered
Page 52
Table 8.
Pebble Production
Page 69
Table 9.
Bristol Bay Regional Taxes 2007
Page 70
Table 10.
Regional Fish Tax Revenues
Page 72
vi
Acknowledgements
I would first and foremost like to thank Dr. Amy Cook, Evergreen faculty
member and my reader for this thesis. Amy’s enthusiasm and love of fish was an
inspiration not only in the classroom, but also in her insightful feedback on drafts
of this body of work.
In addition, I would like to thank Dr. Cheri Lucas-Jennings, also a
member of the Evergreen faculty for her input. Cheri’s passion for her students,
the environment, and creating a space for learning will last with me for the rest of
my days. Many thanks to Max Christian, conservation biologist, and my brotherin-law, and John Byorth, historian, author, and personal friend. Max and John
answered my endless questions, and provided critical analysis for the conclusions
drawn within. I would also like to extend my appreciation to MES colleagues
Sarah Haque and John Means for their support throughout my academic career at
Evergreen. Their tireless encouragement helped me through the rigors of the
program and for this and their friendship, I am eternally grateful.
Finally I want to express my eternal gratitude to my wife Milli and
daughters Kylie, McKenna, and Ryan for their love, understanding, and support
which enabled me to complete the MES/MPA program and this thesis.
vii
Part One
The Bristol Bay Region
1
Chapter 1
Alaska’s Bristol Bay Region
Landscapes
“The Alaska Peninsula and Bristol Bay Basin eco-regions are considered to be
unfragmented landscapes, shaped by unimpeded natural ecological processes…”
TNC-AK, Alaska Peninsula
and Bristol Bay Basin Ecoregional Assessment, 2004
According to The Nature Conservancy (TNC), the Bristol Bay region
stretches from Goodnews and Chagvan Bays on the west side around to the
Cinder River on the southeast. It is bound on the west by the Ahklun and Kilbuck
Mountains, on the north by the Kuskokwim River drainage, and on the east by the
Aleutian Range. The Bristol Bay Basin ecoregion includes the Bristol Bay
lowlands, the Wood-Tikchik Lake systems, and the lowlands draining into the
east side of Bristol Bay. The terrestrial and freshwater portions of the ecoregion
comprise over 7,064,200 ha. (Figure 1.) (TNC 2004).
Figure 1. Bristol Bay, AK Regional Map
2
The Bristol Bay region consists of rolling lowlands with elevations
ranging from 0 to 150 meters and slope gradients of less than 2 percent (Gallant
1995). The region was glaciated during the Pliocene epoch and is covered by
glacial moraine and outwash (Gallant 1995) and much of the lowland soils are
dominated by silt and peat. In addition, there are isolated areas in the lowlands
that are dotted with permafrost while most of southern portion of the region is free
from permafrost (Gallant 1995).
According to the U.S. Forest Service (USFS 2008), the Bristol Bay
regional climate is considered maritime 1 with a continental 2 influence marked by
long, cold winters and short, cool summers. Coastal temperatures range from
winter low averages of approximately 15C to summer high averages of
approximately 18C.
Average coastal precipitation of the Bristol Bay region is
600 to 3,400 mm/year with higher elevations averaging over 4,000 mm/year
(Gallant 1995).
Due to the regional soil composition and climate, vegetation is
characterized as alpine and wet tundra with wet tundra occurring more frequentlyalong the low lying areas and the coast (Figure 2) (Selkregg 1974). Interspersed
with the wet tundra are dwarf shrub communities, and isolated strands of black
and white spruce occur with alder, birch, and willow in areas with adequate
drainage (Ricketts 1999).
1
Climates considered “maritime” are heavily influenced by the ocean or sea and marked
by large amounts of precipitation.
2
Climates considered “continental” are characteristic of a landmass of continental size,
with more extreme temperature variations.
3
Figure 2. Alaska Vegetation Distribution
Ponds, lakes and wetlands dominate the topography of the Bristol Bay
region. Lakes and ponds cover approximately 25% of the surface area while
wetlands cover about 55% of the region (Ricketts 1999). In addition to providing
for flood control, protecting shorelines, and recharging ground aquifers
(Gosselink & Mitsch 2000), wetlands are being recognized as global carbon
dioxide sinks and climate stabilizers (Gosselink & Mitsch 2000). The Bristol Bay
regional wetlands provide significant critical nesting habitat for migratory
waterfowl including the arctic loon, Canada goose, the highest densities of tundra
swan, the majority of the world’s emperor swans, and 50% of the world’s black
brandt population (Ricketts 1999) while the coastal marshes and tidelands support
millions of shorebirds (Powers, Bishop, Grabowski & Peterson 2001).
The most significant of these wetlands, in both size and ecological
importance, is Lake Iliamna. As Alaska’s largest lake, Iliamna covers 2,622 km²
(over 1,000 square miles) and contains a volume115 km³ (Quinn 2005). Iliamna
is also the rearing habitat for the world’s largest run of wild Sockeye salmon
(Oncorhynchus nerka) (Quinn 2005). Where other regions, such as the Pacific
4
Northwest have experienced the negative effects that development activities such
as logging, dams, and urban sprawl have had on salmon, the Bristol Bay
populations thrive. In response to declining returns, other regions have instituted
hatcheries as the technological response to supplement wild populations. Studies
have shown that this response has actually contributed to the continued declines
of wild stock due to significant genetic and behavioral differences between the
two (Vanden Brulle & Geyeski 2003). Bristol Bay is not faced with this dilemma.
The pristine watersheds and undeveloped landscape help to ensure that future
generations of this natural resource will continue in perpetuity.
Lake Clark drains into Lake Iliamna via the Newhalen River and Lake
Iliamna, via the Kvichak River watershed, drains into Bristol Bay. Along the
shores of Lake Iliamna there are 5 villages (Iliamna, Newhalen, Kokhanok, Pedro
Bay, and Igiugig). According to the United States Census Bureau, the combined
resident population of these villages is a mere 539 individuals (2000 census).
In addition to human populations, Iliamna is home to large populations of
native Rainbow trout (Oncorhynchus mykiss), Arctic Grayling (Thymallus
articus) 3 , and one of only two fresh water seal populations in the world, the Nerpa
seal (Quinn 2005).
3
The Arctic Grayling is listed as an endangered species in the lower 48.
5
Adjacent National Parks and Refuge
“ these lands are to be managed for the following purposes… to protect habitats
for, and populations of, fish and wildlife including, but not limited to:,… to
maintain unimpaired, the water habitat for significant salmon populations; and to
protect scenic, geological, cultural, and recreational features.”
AK National Interest Lands
Conservation Act of 1980
The Alaska National Interest Lands Conservation Act (ANILCA) was
passed by congress and signed into law by President Jimmy Carter in 1980. The
law provided for the creation or revision of 15 National Park Service properties
and set aside other public lands for the U.S. Fish and Wildlife Service and the
U.S. Forest Service. In total, the act set aside almost 80 million acres, a third of
which were designated as wilderness 4 .
According to the Alaska Department of Natural Resources (ADNR 2008),
there are 16 national parks within Alaska’s borders. The parks adjacent to the
Bristol Bay region are Katmai National Park and Preserve, which includes the
Alagnak River (Wild and Scenic River designation), and Lake Clark National
Park and Preserve (Figure 3).
Figure 3. Alaska’s National Parks
4
The Wilderness Act was passed by Congress in 1964 (in response to and recognition of
population growth and economic development) for the purpose of preserving and
protecting lands in their “natural condition”.
6
Katmai National monument was established in 1918 to preserve the Valley
of Ten Thousand Smokes-a reference to the ash deposits (ranging 100 to 700 feet
deep) from the eruption of Mt. Novarupta in 1912 (USGS 2008). Novarupta was
the largest eruption of the 20th century and produced 21 cubic kilometers (5 cubic
miles) of volcanic material (Wright & Pierson 1992). On December 2nd, 1980
Katmai was designated a National Park and Preserve and received Wilderness
designation on that same date. Katmai is located at the head of the Alaska
Peninsula and is comprised of over 4 million acres. The park is bounded to the
north by the Lake Iliamna watershed and the west by the Bristol Bay coastal plain
(National Park Service 2008).
Lake Clark National Park and Preserve also received its designation (both
as a national park/preserve and as a wilderness area) in 1980. The park was
created to “protect scenic beauty (volcanoes, glaciers, wild rivers, and waterfalls),
watersheds essential for Red salmon (O. nerka), and the traditional lifestyle of
local residents” (National Park Service 2008). Like Katmai, Lake Clark
encompasses over 4 million acres. The Park and Preserve’s southwest boundary
is a mere 30 miles north of Lake Iliamna (National Park Service 2008). The lake
itself (Lake Clark) drains a watershed of over 9,600 km². It is approximately 74
km long, between 3 and 8 km wide, and its average depth is 103 meters 5 (USGS
2008).
Together, Katmai National Park and Preserve and Lake Clark National
Park and Preserve, protect over 8 million acres of wildlife habitat and in doing so,
5
Lake Clark’s maximum depth is measured at 300 meters.
7
form the eastern border of the Bristol Bay inland region (Figure 4) 6 .
Figure 4. Katmai and Lake Clark National Parks and Preserves
Wildlife Habitat
“What is man without the beasts? If all the beasts were gone, man would die
from a great loneliness of spirit. For whatever happens to the beasts, soon
happens to man. All things are connected.”
Chief Seattle, Leader
of Washington’s
Suquamish people
In addition to sharing the Bristol Bay Region as a boundary, both Katmai
and Lake Clark National Parks and Preserves along with the Bristol Bay region,
form the Alaska Department of Fish & Game (ADF&G) fisheries and wildlife
6
The Yukon Delta National Wildlife Preserve, although adjacent to the Bristol Bay
Region is excluded from this discussion due to relative distance. However, it should be
noted that the refuge protects over 19 million acres and the corridors between Yukon,
Katmai, and Lake Clark are, as of this writing, uninterrupted.
8
South-Central Management Region-region 2. The region is divided into three
separate management areas; the western, central, and eastern management areas
(Figure 5) (ADF&G 2005).
Figure 5. South-Central Management Region-Region 2.
In addition to the fish and bird populations discussed previously, region 2
provides critical habitat for a host of other wildlife populations including moose,
dahl sheep, and bald eagles, to name a few.
The Mulchatna Caribou herd
(Rangifer tarandus), totaling approximately 120,000 individual members, utilizes
the region for calving from early May through June (ADF&G 2008).
The
uninterrupted wildlife corridor allows species to migrate between and among
critical habitats.
The largest populations of Alaska Brown Bear (Ursus arctos) are found
along the Alaska Peninsula and the Bristol Bay coastal region. It is estimated that
the area’s brown bear density is 551 bears/1000km² (Alaska Peninsula and
Katmai National Park and Preserve) representing approximately 50% of Alaska’s
9
total brown bear population (Chapman, Feldhamer, & Thompson 2003). These
densities are a result of the large runs of Pacific salmon that return to coastal
streams, rivers and lakes each year. This valuable source of protein has created
two visible distinctions between the coastal populations and those populations
found in interior habitats. First, coastal brown bears are significantly larger.
Secondly, their fur is darker.
These two differences are responsible for the
distinction between Brown Bears and Grizzly Bears-distinctions within the same
species as a result of their diet (Chapman, Feldhamer, & Thompson 2003).
Chapter Summary
The Bristol Bay region is unique. It is unique to the United States and it is
unique from a global perspective. Few places remain in the world that have been
left untouched by humans and our associated development activities.
In
considering this, one must also consider the natural wonders that can be found in
the region-the largest freshwater lake in Alaska, which supports the world’s
largest Sockeye salmon run and one of only two freshwater seal populations on
the planet; the highest brown bear density on the North American continent;
arguably some of the healthiest estuary and marine environments worldwide; and,
vegetation and wetlands that can play a major role in mitigating global climate
change; a challenge we all face. The Bristol Bay region represents over 55,000
square miles of uninterrupted and unfragmented habitat with unimpeded natural
ecological processes. It is unique.
10
Chapter 2
Bristol Bay’s Sockeye Salmon
Oncorhynchus nerka Behavior and Ecology
“Though much can be learned about the ancestral lineage… most present
populations were founded within about 10,000 years. Thus the species have
existed for several million years but the populations are recent…”
Thomas Quinn, The Behavior and
Ecology of Pacific Salmon & Trout
The Sockeye (Oncorhynchus nerka), widely referred to as “Red” salmon
in Alaska, occurs in the North Pacific and Arctic oceans and associated freshwater
systems. The species, in North America, ranges as far south as California’s
Sacramento River and north to Alaska’s Kotzebue Sound, but their primary
spawning range is from the Columbia River to Alaska’s Kuskokwim River
(Quinn 2005).
Sockeye, like all Pacific salmon, are anadromous. After hatching, juvenile
Sockeye may spend up to three years in freshwater before migrating to sea as
smolt weighing only a few ounces.
Juveniles in freshwater have metallic
green/blue backs, silver sides, and white bellies. They share the same markings
with juveniles in saltwater but are less iridescent. Juvenile Sockeye also have
dark, oval par marks on their sides. These marks are short and rarely extend
below the lateral line (ADF&G 2005).
Sockeye spawning grounds are typically associated with lakes. Unlike
other salmon species, upon emerging from the gravel, Sockeye move into lake
systems where they rear for up to 2 years. A reason for this could be the fact that
11
Sockeye are the smallest of all North American salmon eggs (Quinn 2005).
Rearing in freshwater allows them to avoid predation until such time as they are
large enough to migrate to the sea. Sockeye eggs hatch in the winter and the fry
feed off of their yolk sacs until early spring when they emerge from the gravel
and move into rearing areas.
They feed primarily on zooplankton, benthic
amphipods, and aquatic insects. The ecosystem water quality and associated
productivity are essential for the development of juvenile Sockeye. Therefore,
water quality degradation could have significant negative impacts on the Sockeye
populations.
After migrating from freshwater, Sockeye will typically spend between 1
and 4 years at sea before returning as 4 to 8 pound adults (although some reach as
much as 15 pounds) to the same system in which they were born to spawn and
eventually die (Quinn 2005). Upon entering the marine environment, Sockeye
proceed immediately to the feeding grounds of the high seas (Eggers 1982).
Unlike other species of Pacific Salmon, young Sockeye are rarely seen in
estuarine or inshore environments after migrating to the marine environment
(Miller & Brannon 1982). While at sea, they continue to feed upon zooplankton
but will also prey upon larval and small adult fishes (ADF&G 2005).
Spawning occurs in summer months and varies between river systems.
However, there is very little variation in spawning time from year to year within a
particular system (ADF&G 2005). When adults return to their natal rivers and
streams to spawn, the female selects a redd (or nest) with sufficient flow through
the gravel to support the oxygen requirements of the eggs and embryos (Pauley,
12
Risher, & Thomas 1989). A redd is excavated by the female and made up of 3-10
nesting pockets (Pauley, Reisner & Thomas 1989). The male and female then
come together above the pocket and release the eggs (female) and milt (male).
Immediately after release, the female uses her tail to cover the eggs with gravel
(Quinn 2005). After spawning, adult Sockeye die.
The Bristol Bay Sockeye Populations
“Alaskan’s may disagree on issues of salmon allocation,… but all Alaskan’s can
come together and agree on the need to maintain thriving wild salmon runs.”
Frank Rue, Former
Commissioner of
The ADF&G
Bristol Bay is home to the largest runs of wild Sockeye salmon in the
world where between 10 and 35 million fish return each year. With a few
exceptions, the total returns, spawning stock, and total catch have been at record
levels for the last 20 years (Hilborn 2006). The lakes, rivers, and streams draining
into Bristol Bay (Figure 6.) support these runs and provide critical habitat for
returning adults, incubating eggs, and juvenile Sockeye.
Figure 6. Bristol Bay’s Major Sockeye Producing Rivers
13
In turn, the Sockeye help to support the systems to which they return.
Sockeye are a keystone species for Bristol Bay’s river and lake systems. As
previously discussed, salmon return from the marine environment to their natal
streams to spawn and die. This behavior transports millions of tons of marine rich
nutrients to the region’s nutrient poor freshwater systems.
In addition to
sustaining the productivity of rich riparian and lucustrine systems, the carcasses of
spawned out salmon support many scavenger species including bald eagles,
wolves, fox, lynx, and more (Helfield & Naiman, 2006).
The Kvichak River Sockeye
“Once producing over 50% of the salmon caught in the multi-million dollar
Bristol Bay fishery, Kvichak salmon are in serious decline”
Carol Ann Woody, Ph.D.
Principal Investigator,
Lake Clark Sockeye Salmon
Research Projects
Translated, the word “Kvichak” means from great water-a reference to
Lake Iliamna, the river’s headwaters and Alaska’s largest freshwater lake 7 . From
Iliamna, the river flows approximately 70 miles southwest where it drains into
Bristol Bay near the junction between the Alaska Peninsula and the mainland
(Figure 7.). Historically, the Kvichak River has supported the largest runs of
Sockeye salmon in the region (Johnson, Weiss & McLean 2004).
7
Lake Iliamna is 75 miles long and up to 22 miles wide. It is the second largest freshwater lake in
the United States (USGS).
14
Lk. Iliamna
Kvichak R.
Alagnak R.
Figure 7. The Kvichak River Watershed.
On average, the Kvichak plays host to over 6 million returning Sockeye
annually (Compton, et al. 2006). However, recent returns have been well below
historic figures and ADF&G’s forecast for 2008 predicts a Kvichak run of 3.56
million Sockeye-again, well below historic returns (ADF&G 2007). It is unclear
why Kvichak River runs have declined. Some have hypothesized that low marine
productivity associated with the Pacific Decadal Oscillation (El Nino) has
negatively impacted Sockeye while residing in the marine environment (Hilborn
2006). This may not be the only factor as some regional systems, such as the
adjacent Alagnak watershed, have experienced increased returns (ADF&G 2007)
which suggests a freshwater mechanism as the culprit. The USGS Biological
Science Office, recognizing a lack of biological information in the Bristol Bay
region, has partnered with local, state, federal, NGO, and academic stakeholders
in addressing the Kvichak River Sockeye through a cooperative research effort in
Lake Clark.
The results of this research are not yet available and a sound
15
scientific rationale for the cause of Kvichak River Sockeye declines remains at
large for this biologically sensitive ecosystem.
Chapter Summary
The Sockeye is the only member of the Pacific salmon family that utilizes
lake systems for rearing. After spending up to two years in these freshwater
environments juvenile Sockeye migrate to the marine environment where they
feed, grow, and mature before returning to their natal streams to spawn and die.
The Bristol Bay region provides the ideal habitat for spawning Sockeye as their
migration routes are relatively short, the rivers are generally free from extensive
turbidity, and, as previously discussed, are unimpeded and not impacted by
development activities. The marine nutrients Sockeye bring with them each year
provide the vital nourishment for not only other species, but the system itself. As
a keystone species their annual appearance within the region is essential. The
Kvichak River Sockeye runs have experienced recent declines that have created
many unanswered questions. As the historic “producer” for Bristol Bay, the
Kvichak is a case study with significant implications for other regional
watersheds.
As such, an argument can be made against any significant
development activities prior to identifying root causes for the declines.
16
Chapter 3
Bristol Bay’s Economy
Demographics
“The economy is substantially dependent upon the harvesting and processing of
fishery resources…Commercial, sport, and subsistence fishing plays a role in
virtually every community in the region.”
Southwest Alaska Municipal
Conference (SWAMC)
The Bristol Bay Region’s cash economy, like much of rural Alaska is
dominated by seasonal fisheries. Most residents participate, at some level, in the
harvest, processing, or transportation of the catch. Next to fisheries, government
jobs, primarily state and local government, make up much of the remaining
employment opportunities-about 35 percent of the region’s residents are not in the
labor force (Northern Economics 2004). Additional employment opportunities,
especially in the more remote communities, are scarce.
The region is divided into three jurisdictions-the Bristol Bay Borough, the
Lake and Peninsula Borough, and the Dillingham Census Area. According to the
Alaska Department of Commerce, Community and Economic Development
(DCED), these municipalities represent many small communities (Figure 8.) and
have a combined population of approximately 7,645 individuals (Bristol Bay
Borough: 1,105; Dillingham Census Area: 4,912; and the Lake and Peninsula
Borough: 1,628) (DCED 2008).
17
Figure 8. Bristol Bay Regional Communities
Located on the southeast edge of Bristol Bay, the Lake and Peninsula
Borough is comprised of over 23,600 square miles with a population of .1
person/square mile. Interestingly, the county seat, King Salmon, is located within
the jurisdiction of the Bristol Bay Borough (discussed below). As such, King
Salmon is the main transportation hub for both boroughs.
This unique
arrangement illustrates the lack of transportation infrastructure throughout the
region.
The Lake and Peninsula Borough represents 17 small fishing
communities and traditional Alaskan villages (DCED). As of the 2000 Census,
the per capita income for residents of the borough was $27,900 with almost 19%
of the population below the poverty level.
According to DCED, the Dillingham Census Area consists of 11 small
communities scattered over 18,000 square miles (.3 residents/square mile) along
the northwest edge of Bristol Bay. The largest of these communities is the town
of Dillingham. Other than a road connecting Dillingham with the village of
Alegnegik some 25 miles away, there is no infrastructure supporting the
18
remaining communities.
The town of Dillingham represents the economic,
transportation, and public service center for western Bristol Bay (DCED). The
per capita income for the Dillingham Census Area was $27,900 in 1999 (2000
Census) with 24.4% of the population below the poverty level.
The Bristol Bay Borough is comprised of the villages of Naknek, South
Naknek, and King Salmon and includes the Kvichak River watershed.
The
borough has jurisdiction over approximately 504 square miles. This translates to
about 2.5 residents per square mile compared to 79.56 residents per square mile
for the rest of the nation (2000 Census) 8 . It is the smallest of all the sixteen
incorporated Boroughs in Alaska (Northern Economics, 2004).
However,
according to the U.S. Bureau of Economic Analysis, in 2001 the Bristol Bay
Borough was the wealthiest, with a per capita income of $42,401-almost $5,000
higher than the state’s largest municipality, the city of Anchorage (Northern
Economics, 2004). The village of Naknek serves as the borough’s “county seat”
and is connected by road to King Salmon. The town of King Salmon supports a
commercial airport and serves as the borough’s transportation hub and link to the
“rest of the world”. The village of South Naknek (located just across the Naknek
River from the village of Naknek) is a more traditional Alaskan village as there is
no transportation infrastructure support other than a small airport.
8
For context, consider that King County, Washington consists of approximately 2000 square miles
with a population of over 817 individuals per square mile while Thurston County, WA consists of
727 square miles with a population of 310 individuals per square mile.
19
Subsistence
“Subsistence continues to be an important part of the diverse cultures and
regional economies… Subsistence provides a measure of economic stability in
areas with a mixed cash economic system.”
Alaska Dept. of Fish and Game
Division of Subsistence
As the cash economy is seasonal (associated with the summer salmon
runs), residents of the Bristol Bay region, as is the case with most of rural Alaska,
rely heavily upon subsistence hunting and fishing (SWAMC).
The wide
abundance of salmon and wildlife provide the basis for this element of the
economy and help sustain not only the residents of the region, but the culture of
the native peoples. In her testimony before the U.S. Senate Committee on Indian
Affairs, Rosita Worl, who received her Ph.D. form Harvard in anthropology,
described rural Alaska as one of the few remaining places in North America
where the people are largely dependent and culturally attached to a hunting and
gathering way of life (Worl, 2002).
Worl, an Alaskan native, President of the
Sealaska Heritage Institute, board member of the Alaska Federation of Natives,
and Chair of the board’s Subsistence Committee, draws upon her professional
research and her experience as a participant in the Alaska subsistence culture in
applying her perspective that where other native cultures have succumbed to the
pressures placed upon them by governments to assimilate, Alaska native cultures,
languages, and lifestyles thrive.
According to Scott Goldsmith of the University of Alaska Anchorage
Institute of Social and Economic Research (ISER), about 90% of rural Alaska
households are engaged in subsistence activities (Goldsmith 2007). Goldsmith
20
goes on to state that the average per person annual harvest is estimated at 544
pounds-351% of the daily average population protein requirement. To quantify
this for economic purposes, the ADG&G’s Subsistence Division has conducted
studies and assigned a replacement value of between $3 and $5 per pound 9 .
Based on these numbers, the annual food replacement value is between two and
three thousand dollars per person.
Regarding Bristol Bay, just over 50% of the total subsistence harvest
comes from salmon (Figure 9.) (Fall & Krieg, 2006). The Alaska Board of
Fisheries in 1993, established a harvest range between 155,000 and 172,000 fish
annually for Bristol Bay subsistence with almost two thirds of those fish coming
from the Kvichak River watershed. As such, it comes as no surprise that Sockeye
salmon represent almost 80% of the recent 10 year (1996-2005) subsistence
fisheries harvest (Fall & Krieg 2006, Alaska Board of Fisheries, 2008).
Figure 9. Bristol Bay Subsistence
Other
8%
Other Fish
10%
Salmon
51%
Land Mammals
31%
Source: ADF&G Division of Subsistence
9
It should be noted that these values do not represent the cost of engaging in subsistence activities.
Costs associated with regional subsistence include fuel, machinery, ammunition, nets, etc.
21
Government Employment and Payments
“The $8.4 billion the federal government spent in Alaska in 2004 was roughly
equivalent to all the wages private industry paid and,… supported one in three
Alaska jobs.”
Understanding Alaska: People, Economy,
and Resources Institute of Social and
Economic Research, University of Alaska
Anchorage
According to the University of Alaska, Anchorage Institute of Social and
Economic Research (ISER) (2006), local governments receive about 30 percent of
Alaska’s federal dollars in the form of grants with about 40 percent of federal
spending going to individual residents in the form of income, social security, etc.
Alaska’s businesses receive approximately 20 percent (purchases and
contracting), while Native Corporations (federally recognized tribes) receive just
over 8 percent. The balance of federal funds is distributed between the university
system and other non profit organizations.
Alaska’s residents also receive
payments in the form of oil rents from the “Permanent Fund”. Created in 1976 by
voters, the Permanent Fund captures a share of the state’s oil revenues. Each
year, individual residents receive a Permanent Fund dividend check. In 2007, the
individual permanent fund dividend was $1,654.00 (Alaska Permanent Fund
Dividend Division).
Government sector employment in the Bristol Bay region is dominated by
local government opportunities. In 2005, 1,367 jobs and over $34 million in
payroll were attributed to local government spending (Table 1.)
22
Table 1. Bristol Bay Region Local Government Jobs (2005)
Jurisdiction
Bristol
Bay
Borough.
Dillingham
Census Area
Lake & Pen.
Borough
Local Govt Jobs
Total
Jobs
Govt. Payroll ($million)
155
315
$5.50
822
2,488
$21.20
390
710
$7.70
Source: State of Alaska Div. Labor
State government has a much smaller presence in the region. In 2007 there were a
combined total of just 134 state jobs making up less than .6 percent of the state’s
total (Table 2.)
Table 2. Bristol Bay Region State Government Jobs (2007)
Jurisdiction
State Govt Jobs
Percentage
Total
Bristol Bay Borough.
33
0.1
Dillingham Census Area
93
0.4
Lake & Pen. Borough
8
<.1
of
Source: Alaska Div. Labor
Commercial Fisheries
“Given the importance of the industry (commercial fisheries) to the region,… any
changes in management structures, policies,… as well as any changes in external
economic forces, could have pervasive effects.”
Southwest Alaska Municipal Conf.
The Bristol Bay commercial salmon fishery drives the region’s economy.
Salmon harvest, processing, and shipping provide the economic base for the
region’s cash economy. The fishery is managed by the ADF&G Commercial
Fisheries Division and divided into 5 districts-Togiak, Ugashik, Egegik,
Nushagak, and the Naknek/Kvichak (Figure 10.) (ADF&G). The districts are
23
managed by escapement goals (number of fish reaching the spawning grounds)
for individual systems and river specific stocks.
Figure 10. Bristol Bay Commercial Fishing Districts (source: Trout Unlimited)
Over the course of its 125 year history, Bristol Bay commercial salmon
fishermen have caught “more than 1.5 billion fish from the icy waters of the near
shore Bering Sea” (Link, et al., 2003). The fishery, over time, has seen its share
of fluctuation in annual catch numbers. According to Link, et al. (2003), where
the average annual harvest in the1990s was the highest on record at 30 million,
the long term fishery average is 15 million annually. It is important to keep this
in context as the fishery has recently experienced returns that are more in line
with historic averages. However, the most recent numbers suggest a possible
upturn. According to the ADF&G (2008), the 2007 Bristol Bay harvest was
approximately 31.6 million while the 2008 forecast predicts a total catch of over
24
31 million. In addition, all of the districts, including the Kvichak met their 2007
escapement goals (ADF&G, 2008).
Regarding the value of the harvest and in addition to fluctuating returns,
the fishery has also experienced fluctuation in the market value of the catch. Per
pound price for Sockeye peaked in 1989 at $3.19 and hit an historical low of just
$.40 in 2002 10 (DCED, 2008). As a result, the cash incomes of resident fisheries
participants can be highly variable. For example, in 2002, of the 2,121 total, 607
Bristol Bay resident permits were fished. Resident fishermen grossed a total of
$17,613,867. In contrast, the 2005 season saw 2,476 total permits with 617 of
them belonging to local residents.
The gross resident earnings topped $45
million-a threefold increase (Table 3.). The primary reason for the decline of
Table 3. Bristol Bay Harvest 2001-2005
Total Number
Alaska Resident
Bristol Bay Region
Gross Resident
Year
Permits Fished
Permits Fished
Resident Permits Fished
Earnings
2001
2,713
1,635
703
23,544,895
2002
2,121
1,279
607
17,613,867
2003
2,451
1,453
662
27,660,128
2004
2,406
1,386
611
36,540,218
2005
2,476
1,419
617
45,059,323
Source: Author's calculations-source data from Alaska Department of Labor
Ex-vessel value has been attributed to the increase in farmed fish on the market
(Duffield, Neher, & Patterson 2007). Farmed salmon, from Chile and British
Columbia, are available year round and have driven down the value of wild
stocks.
Licensed crew members make up a large part of the salmon harvest
workforce and share in the gross earnings of the catch. This share usually takes
10
Per pound price has decreased in recent years with the increase in farmed fish.
25
the form of a percentage of the gross earnings. Residents of the Bristol Bay
region who participated in the fishery are shown in Table 4. Crew member wages
are highly variable (ranging anywhere from a fixed salary to between 2.5 and 50
percent of the gross earnings).
Table 4. Bristol Bay Resident Crew Members
Borough/Census Area
2000
2001*
2002
2003
2004
Bristol Bay
241
N/A
187
183
175
172
Dillingham Census Area
Lake and Peninsula
Borough
Total
Regional
Residents
858
N/A
524
596
608
643
225
N/A
115
157
137
164
1,324
N/A
826
936
920
979
All Crew Members
5,710
4,899
3,745
4,416
4,313
4,368
Source: Commercial
Commission
Fisheries
2005
Entry
*Crew data not available for 2001 season
In addition to harvesting the catch, employment processing the catch is
also an important component of the commercial fishery economy. Between 2001
and 2005, Alaska resident workers earned between a low of $3.03million (2003
season) and a high of $4.04 million (2001 season) in wages (Table 5.).
Table 5. Bristol Bay Processing Employment
Alaska Resident
Year
Total Workers
Resident Wages
Workers
(million)
2001
2,862
704
4.04
2002
2,273
509
2.84
2003
2,484
621
3.03
2004
3,474
590
3.3
2005
3,272
641
3.47
Source: Author's calculations-source data from Alaska Dept. of Labor
Bristol Bay region residents made up about 20 percent of the total labor force
during the 2006 season. Of the total processing jobs available, 354 were held by
26
resident workers. The total gross wages topped $16 million and local resident’s
share of the take was over $3.5 million ($3,583,672) (Table 6.) with 454 Bristol
Table 6. 2006 Seafood Processing
Bristol Bay Region Resident
Workforce
Borough/Census
Area
Total
Workers
Resident Workers
Total Wages
Resident
Wages
Bristol Bay Borough
Dillingham Census
Area
Lake and Peninsula
Borough
2,009
354
16,400,671
2,542,104
485
65
3,386,262
514,712
446
35
4,222,846
527,856
Bristol Bay Total
2,940
454
24,009,778
3,584,672
Source: Author's calculations-source data from Alaska Dept. of Labor, Research and Analysis
Section
Bay residents participating, their individual gross earnings fell just shy of $8
thousand at $7,895. At first glance, given the short duration in which it was
earned (less than 3 months), the wages appear significant.
However, when
considering that this figure represents a significant share of an annual household
income, the figure becomes much less impressive.
Sport Fisheries
“Many go fishing all their lives without knowing that it is not fish that they are
after.”
Henry David Thoreau
Anglers from around the world visit the region to experience Bristol Bay’s
pristine watersheds in search of wilderness, adventure, and pescatoral nirvana.
The sport fishery targets all five species of Pacific Salmon but is renowned for the
trophy Rainbow Trout (Oncorhychus mykiss) populations of the Kvichak River
watershed. Each year, thousands of fishermen test their skills and in doing so,
27
spend millions of dollars 11 . Next to commercial fishing and processing, sport
angling is the most important private economic sector in the Bristol Bay Region
(Duffield, Patterson, and Neher 2007).
In their report for Trout Unlimited,
Alaska, the authors attribute a total of 1,252 jobs (in 2005) in Bristol Bay to
support the recreation industry. Of this total, 846 Alaska resident jobs and $27
million in traceable pay role were associated with sport fishing in the region
(Duffield, Patterson, and Neher 2007). Unfortunately, only about 50 percent
(430) of those employment opportunities were held by Bristol Bay region
residents. There is little information regarding the current jobs and associated
incomes for local residents as a direct result of the sport fishery.
What
information exists is outdated. As a result, the ADF&G has undergone a study to
quantify the direct economic effects induced at both the state and local levels by
the sport fishery. These effects will be expressed in terms of total jobs, wages,
taxes, etc. at both the regional and local levels. The study timeline indicates that
the data collection phase has been completed and the data analysis phase is
scheduled to be completed in July 2008. A final report is expected in December
of 2008.
More information regarding the study can be found at:
www.sf.adfg.ad.us/Statewide/Economics/updates.cfm
11
In 2005, 24,276 non-Alaska resident visitors spent $75 million. Source: Duffield, Patterson, and
Neher 2007).
28
Regional Economic Development
“In Fiscal 2006, the Alaska Office of Rural Development delivered over $100
million in housing… for Fiscal 2007, we look to continue this record of
achievement and look to continue improving the quality of life for rural Alaskans
Chad Padgett, Acting State Director
USDA Rural Development
The Bristol Bay Native Corporation (BBNC), along with 12 other regional
native corporations, was formed by the Alaska Native Claims Settlement Act
(ANCSA) of 1971 (Public Law 92-203). ANCSA, signed by President Nixon and
enacted by congress, settled once and for all, the 100 year claim that had persisted
since Alaska was purchased from Russia in 1867. This act remains as the largest
monetary compensation and land settlement of aboriginal claims in U.S history.
Never before had indigenous people received monetary compensation (over $962
million), lands, funds for corporate development, mineral rights, and a legislative
resolution to their land claims (Liebner 2006).
As a non profit diversified holding company, the BBNC represents
approximately 8,000 individual native shareholders in the region. A review of the
organization’s website found numerous references to the BBNC’s commitment to
conserve the region’s natural resources and to “celebrate and preserve the Alaskan
native culture and linkage with the land that provides the basis of our style of life”
(BBNC Strategic Intent 2008). The corporation either owns or holds a significant
share in ten companies nationwide and has emphasized stability, economic
development, and employment opportunities for shareholders with its investment
portfolio (BBNC 2008) while paying out over $70 million in dividends since
29
inception in 1971 (BBNC 2008). In 2007 the BBNC, for the first time ever,
exceeded $1 billion in total revenues and paid shareholders a $5,185 dividend
(BBNC Annual Report 2007). The emphasis on economic development and
profits has not been at the cost of the natural environment. In order to continue
the tradition of profitability while conserving the landscape, the BBNC and its
stakeholders must find creative, sustainable solutions to the region’s under
employment challenges.
Chapter Summary
Alaska’s boasts the highest percentage of indigenous peoples of any state
in the nation. Nearly 1 in 5 Alaskans is native. The ratio increases in rural
Alaska where, on average, one third of the population is native (2000 Census).
The Bristol Bay region is remote, sparsely populated, and with the exception of
the regional centers, virtually devoid of transportation infrastructure. As a result,
local residents are highly dependent upon natural resources (particularly salmon)
for both income and subsistence. Of the 7,645 individuals living in the region,
about 30 percent are unemployed. The majority of the population takes part in
some form or fashion in the harvest, processing and/or transportation of the
seasonal fisheries catch.
In addition to natural resources, residents are also
dependent upon government employment and payments. As the second leading
source of employment, government jobs represent about one third of the region’s
total. The limited employment opportunities within the region can be linked
directly to the lack of transportation infrastructure. This limits the cash economy
as most goods and services must be obtained outside of the region including many
30
basic necessities and translates into an inflated cost of living. Additionally, as
employment opportunities are limited, many residents are dependent upon
subsistence activities to supplement cash incomes.
31
Part Two
The Development Dilemma
32
Chapter 4
Alaska’s Mineral Resources
Resource Extraction in Alaska
“The Alaska mining industry produced another strong year in 2007… Revenue to
the state of Alaska from the minerals industry for FY 2007 increased 292% and
reached $179 million.”
Alaska Minerals Commission
2008 Report to the Governor
Executive Summary
Much like the lower 48, the emergence of the white man on the landscape
marked a significant change for Alaska.
In the early 19th century, Russian
explorers were the first to recognize the region for its rich mineral deposits
(Alaska Mining 2008) and upon acquisition by the United States (in 1867),
exploration and prospecting continued in Southeast Alaska. In fact, the discovery
of gold deposits eventually led to the location of the state capital-Juneau. These
discoveries, in addition to those of the Yukon and Klondike, led to additional
prospecting in Alaska’s interior region. In 1899 placer gold was discovered in
Nome and within 11 years, over 550 thousand ounces were produced (Alaska
Mining 2008). Accordingly, the Fairbanks district gold production reached $6
million/year by 1905. In short, gold and other valuable mineral resources have
been, and continue to be, abundant in the 49th state. In fact, according to the
Alaska Minerals Commission, created by the state legislature in 1986, the
Alaskan mining industry revenues increased 292% in 2007 and reached $179
million (2007 report). Although much has changed since statehood, one thing
remains constant-mining (Figure 11.).
33
According to the Alaska Department of Labor and Workforce
Development, an estimated 14,000 Alaskans are employed in the mining industry
(2008). In addition, DCED attributes the “re-emergence” of mining as the
Figure 11. Major Mining Activity in Alaska; DCED 2008
catalyst for infrastructure development in rural regions and an economic base for
the state (DCED 2006).
DCED describes Alaska’s mineral exploration and
development opportunities as “among the best in the world” citing over 241 hard
rock mineral deposits.
34
Northern Dynasty Minerals Ltd.
“NDM clearly recognizes that a feasible project is one that is both economically
viable and environmentally and socially responsible.”
Northern Dynasty Mines Inc
Draft Environmental
Baseline Studies Proposed
2004 Study Plan
Headquartered in Vancouver, Canada, Northern Dynasty Minerals, Ltd
(NDM) operates as a mineral exploration company. NDM, formerly known as
Dynasty Resources, Inc., was incorporated on May 11, 1983. The company
changed its name to Northern Dynasty Minerals, Ltd. on October 11, 1997. NDM
became a reporting company in the province of British Columbia in 1984 and was
listed on the Vancouver Stock Exchange from 1984-1987, the Toronto Stock
Exchange from 1987-1993, and unlisted but still in good standing with all the
security commissions from 1993-94. From 1994 to present, the company has
been listed on the TSX-Venture Exchange (formerly the Vancouver Stock
Exchange). In November of 2004, the company’s common shares were also listed
on the American Stock Exchange (AMEX).
NDM is categorized as a “junior” mining exploration company (SEC
Form 20-F) and wholly owns two Alaskan subsidiaries. Northern Dynasty Mines,
Inc. is their operating subsidiary and Northern Dynasty Holdings Inc. is their
Alaska mining claims title holding subsidiary.
NDM’s primary means of generating capital resources is through the sale
of common shares. According to NDM’s SEC form 20-F, filed in 2005, the
company has never shown a profit. Furthermore, NDM, since incorporation, has
35
“paid no dividends on its shares and does not anticipate paying dividends in the
foreseeable future” (NDM SEC form 20-F 2005). As an industry, the exploration
for minerals is highly speculative and involves substantial financial risk over an
extended period of time (Moon, Whately, & Evans 2006). If exploration and its
associated activities do not result in commercial grade mineral deposits, all
evaluation and land acquisition costs are lost. Industry wide, the business of
exploration results in but a few producing mines (Moon Whately, & Evans 2006).
According to their annual report SEC form 20-F filed in 2005, the company has
had but one “success”- a small scale mining operation in Nevada of which NDM
held a “participating interest”. The Little Bald Mountains Project attained modest
gold production and subsequent cash flow. Otherwise, NDM has never seen a
project through to the operation phase.
The Pebble Partnership
“The Pebble Project is making a tremendous economic contribution to our
communities today, and could make an even larger contribution in the future-one
that would benefit all Bristol Bay residents.”
Letter of support signed by
Iliamna Natives Ltd., the
Alaska Peninsula Corp., and
the Pedro Bay Corp.
The first mineral exploration efforts in the Bristol Bay region were
conducted in 1986 by the exploration company Cominico Alaska Exploration
(CAE) (NDM SEC form 20-F 2005). Initial core sample drilling in the area now
know as “Pebble West” began in 1988 (NDM SEC form 20-F 2005). Located just
17 miles from the village of Iliamna and the shores of Lake Iliamna, the Pebble
36
deposit is a near surface mineral deposit. It lies entirely on state owned land
located adjacent to what is considered the “heart” of the Kvichak watershed
(Figure 12.).
Figure 12. “Pebble” Mineral Deposit Location
CAE continued their exploration efforts until 1993 and estimated that the deposit
contained approximately 3 million tons of copper and 11 million ounces of gold.
Upon completion of these estimates, little other activity ensued for almost a
decade.
In 2001, NDM obtained options from Teck Cominico (the successor and
parent company of CAE) on the almost 100,000 acres of Alaska state mineral
claims land. NDM then invested $5 million in the project and began an extensive
drilling program in an attempt to determine and delineate the deposit and by early
2005 expanded the estimate to over 4,100 million tons of ore. In September of
2005 NDM announced that, as a result of their exploration efforts, a richer, deeper
deposit had been discovered east of the Pebble West site. End of year 2005
exploration activities estimated that the “Pebble East” deposit contained a 3.4
37
billion ton resource including 42.6 billion tons of copper, 39.6 million ounces of
gold, and 2.7 billion pounds of molybdenum. This discovery expanded the scope
and potential value of the combined mineral resources making the Pebble Project
one of the world’s most significant. As a result of the project’s potential, NDM
attracted the attention of one of the world’s leading mine operators, Anglo
American-a British owned corporation (Pebble Partnership 2008 NDM SEC form
20-F 2005).
In 2007, a wholly owned U.S. subsidiary of Anglo American
partnered with NDM to work toward permitting, construction, and operations of
the Pebble Project. The deal saw Anglo American become a 50% partner with
NDM in exchange for a $1.425 billion investment in the project (Pebble
Partnership 2008). The investment will provide the capital necessary to complete
the pre-feasibility study, the feasibility study itself, and the equity needed for the
construction phase of the project.
By the end of 2006, the partnership had invested $126 million for the
activities associated with preparing a proposed mine development plan for
submission and review by government and the public (Pebble Partnership 2008).
In planning and developing the associated timelines, the partnership will be
subject to numerous regulatory reviews and promises to operate under the
following “guiding principles” (Pebble Partnership 2008):
•
Pebble Will Benefit People-Pebble Is For All Alaskans
•
Pebble Will Co-exist With Healthy Fish, Wildlife, And Other
Valued Natural Resources
•
Pebble Will Apply The World’s Best And Most Advanced Science
•
Pebble Will Help Build Sustainable Communities
38
•
At Pebble, We Listen Before We Act
The plan is still being developed and is scheduled for completion in 2009.
According to NDM’s project timeline, they anticipate permitting approval by end
of year 2011 and beginning the production phase at both locations sometime in
2015 (NDM Presentation).
Economic Benefits of Pebble
“The Pebble Partnership is working to maximize benefits to local communities,…
The Pebble project is expected to provide Alaskan’s 2,000 new jobs during
construction and 1,000 long term operation jobs once the mine starts
production.”
Northern Dynasty Minerals
Investor Center Fact Sheet
January, 2008
Mining has played a key role in the economic development of rural
Alaska. Improved infrastructure, increased revenues, rents, and jobs can all be
associated with the approval of large-scale mining. One of the more recent
examples of this is the Red Dog mine-the world’s largest Zinc concentrate
producer (AKDNR 2008). Red Dog began production in 1989 and represents a
partnership between NANA (the local native association) and Teck Cominico
Alaska-the Canadian company’s wholly owned U.S. subsidiary (Alaska Miners
Association).
Located in an otherwise remote and undeveloped region in
Northwest Alaska on the middle fork of Red Dog creek in the Delong Mountains
of the western Brooks Range (AKDNR 2008), the Red Dog mine is an open pit
zinc and lead mine. The mine is responsible for the Delong Mountain Regional
Transportation System, transportation infrastructure that was non-existent prior to
39
mining. In 2007, Red Dog employed 456 workers (56% of whom were NANA
shareholders); paid $9 million to the Northwest Arctic Borough in payments in
lieu of taxes (PILT); and paid $170 million in net smelter royalties to NANA
(McDowell Group 2006).
Supporters of the Pebble Project hope that approval of the mine will have
similar impacts in the Bristol Bay region. In fact, the mine could be the economic
base for one of the states poorest regions with some of the lowest average annual
incomes and the highest unemployment rates.
The Pebble partnership has
estimated and publicly stated that the mine would create 2,000 jobs during the
construction phase and 1,000 operations jobs paying about $80,000 annually for
the life of the mine. Given that the mineral deposits are the world’s second
largest and could support an 80+ year mining operation, this could represent an
employment base for the next 3-4 generations of Alaskans. In addition, the size
and scope of the project could generate tens of millions of dollars in local and
state government revenues annually and billions over the life of the mine while
generating hundreds of millions of dollars annually in service and supply
contracts. The region would also benefit by the transportation infrastructure that
would be required to support the mining operation. This infrastructure would link
Bristol Bay to more developed and accessible Alaska and, in doing so, could
significantly reduce the costs of goods, reduce energy costs, and create
opportunities for additional economic development for local residents.
40
Chapter Summary
Mining was the first established industry in Alaska. Early prospecting,
finds, and “rushes” created the state’s urban areas. Settlement in cities such as
Anchorage, Fairbanks, Skagway, and the state’s capital, Juneau are all linked to
mining (McDowell Group 2006). Mining also created much of the transportation
infrastructure that exists today including the Alaska Railroad and the Richardson
Highway. Recent mines have provided additional infrastructure, jobs for rural
Alaskans, and millions of dollars in revenues for state and local governments
while creating economic stimulus for goods and services through service contracts
and payments to native corporations.
When considering the vast natural resources found in Alaska, it is not
surprising that the world’s most significant deposit of copper and gold lies
beneath the Bristol Bay region’s landscape.
The Canadian-based junior
exploration company, Northern Dynasty Minerals and London-based Anglo
American have partnered to develop a long-term, large-scale mine known as
Pebble adjacent to the shores of Lake Iliamna.
The project promises jobs,
infrastructure and billions of dollars in revenues over the estimated 80-year
operation. An operation that the Pebble Partnership promises will “co-exist with
healthy fish”.
41
Chapter 5
Mining and the Environment
The Open Pit Extraction Process
“The non-ore waste is significant… and typically contains many of the sulfide
minerals found in the ore. Decomposition of these minerals causes heavy metals
to be leached from the waste, which can contaminate surface and groundwaters
on and off the mine site.”
David Chambers, Ph.D.
Center for Science in
Public Participation
Open pit mining is one of the least expensive underground ore mining
techniques and has facilitated the extraction of low-grade ore quantities such as
those found at Pebble (Chambers 2007). The process involves blasting to remove
material and produces more waste than similar deposits utilizing underground
mining techniques as the material around the ore must be moved as opposed to
selectively mining only the ore as is the case with underground mining techniques
(Figure 13.).
Figure 13. Butte Montana’s Berkley Pit (Clark Fork Coalition).
42
The material removed from the pit is classified as either ore or waste. The
ore is processed while the waste material is stored on site in ponds behind tailings
dams.
Waste typically contains acid generating rock and low-grade sulfide
minerals found in the ore. Metalloids such as arsenic and selenium can also leach
from both acid generating and non-acid generating waste rock. If not properly
contained within the pond, during decomposition, these can leach into
groundwater both on and off of the site (Chambers 2007). Modern techniques
employ a liner for tailings storage to minimize seepage and groundwater
contamination.
The ore producing rock is ground and crushed before being
placed in flotation tanks where chemicals including cyanide (primarily for gold
ore) are added to separate the sulfide minerals from the rock. The degradation of
some process chemicals including cyanide can produce ammonia and are toxic to
aquatic organisms.
Upon closure of an open pit mine, a pit lake forms due to precipitation.
Pit lakes can negatively impact the environment in two significant ways. First,
the exposed rock can cause mineralization and contamination of the water.
Secondly, depending on the hydrology of the site, pit lake water can migrate due
to fractures from blasting and contaminate both ground and surface water off site.
43
The Underground Extraction Process
“With underground Block Caving no pillars [support] are left… In fact, Block
Caving is designed to induce collapse in the ore zones”
David Chambers, Ph.D.
Center for Science in
Public Participation
Of the many forms of underground mining, Block Caving is primarily
used for low-grade ore deposits. Profitability of underground mining requires the
application of production rates and Block Caving provides the highest production
rates of all mining techniques. Consequently, Block Caving is also the cheapest
form of underground mining (Chambers 2007). Unlike “Room and Pillar” mining
where shafts are supported by pillars of ore during mining and then backfilled
after closure, Block Caving does not utilize pillars and is actually designed to
induce collapse in the ore zones (Chambers 2007). The material is then removed
for processing. One of the primary disadvantages to block caving is the fact that
large areas void of stabilizing material can cause subsidence features on the
landscape (Figure 14.).
Figure 14. Block Caving Subsidence (Groundwater Awareness League).
44
From an environmental standpoint, subsidence is a problem. As is the
case with open pit tailings, the underground material will be mineralized and it
can be assumed that the mined area will have both oxygen and water available to
it. Again, as is the case with open pit mining, this could lead to decomposition,
acid mine drainage, and contamination of surface and groundwater. According to
their website, Pebble intends to utilize Block Caving for their underground
operation at Pebble East (2008).
History is filled with examples of environmental degradation associated
with mining. States such as Utah, Nevada, and Arizona (among others) have
experienced water contamination, human illnesses, and loss of species as a result
of mining activities. Regarding Pebble, the primary environmental concern is the
region’s water quality and its importance for healthy fish populations. Western
Montana’s Milltown dam, once the nation’s largest Superfund site (EPA 2005) is
an example of the negative environmental impacts mining can have on an
ecosystem. Milltown is responsible for degradation of habitat, water quality, and
fish populations. The dam operated for nearly one hundred years and in doing so,
served essentially as tailings impoundment and reservoir for the Berkley pit
collecting over 6 million cubic yards of mine tailings behind its wall.
The
Milltown case offers insight into a possible future for the Bristol Bay region.
45
The Milltown Dam Case Study: A Century of Mining
“…when the last piece of timber is added to the dam it will be in such condition
that the highest waters ever known in this vicinity will not affect it in the least.”
George Slack, Superintendent
Milltown Dam
In 2004, the Milltown Dam located just below the confluence of the
Blackfoot and Clark Fork Rivers in Western Montana represented the largest
Superfund site in the nation. Over one hundred years of mine tailings have come
to rest behind the dam representing approximately 6.6 million cubic yards of toxic
laden sediment that threatens to contaminate the city of Missoula’s water supplylocated some 10 miles downstream-not to mention the fish populations throughout
the entire river system. The Environmental Protection Agency determined that
the dam will come down and that the contaminated sediment will be removed
(work began in 2006).
Background
The Milltown Dam was, at the time, one of the largest hydroelectric dams
in the world with the ability to provide 11,000 volts of electricity. It was built by
William Clark, the “Copper King” to support his logging and mining interests in
the region. The dam was finished on January 10, 1908 and, almost immediately,
tailings from the Berkley Pit, one of the largest open pits mines in the world at the
time, began coming to rest behind its walls.
Prior to the completion of the dam, George Slack, the construction
supervisor, stated publicly, “…when the last piece of timber is added to the dam it
will be in such condition that the highest waters ever known in this vicinity will
46
not affect it in the least.” Five months later, the dam was breached as a result of
the great flood of 1908 (Devlin). The flood event was so powerful it destroyed
every bridge in Missoula. Water poured over the top of the Milltown Dam and
flooded the powerhouse to a depth of six feet while upstream tailings were further
deposited behind the barrier.
In 1981, almost 100 years after completion of the dam, Residents of
Milltown began to complain about a “strange taste” in their local water supply.
The strange taste led to testing of the area well water. Test results showed high
levels of arsenic, up to 510 parts per billion (EPA 2003). A high arsenic level is
known to be carcinogenic causing cancer in the bladder and kidneys and local
residents were asked to stop drinking the water in August of 1981 (Clark County
Coalition, p. 6-7, 2002). The discovery was fortuitous in that arsenic is tasteless
and if not for the complaints, the discovery may have come much later if at all.
Eventually the contaminants were traced to the reservoir where not only arsenic
but various other heavy metals including copper, zinc, cadmium, and lead were
discovered. Subsequently, state and local officials performed an extensive wellsampling program which uncovered a groundwater plume of arsenic extending
from the reservoir into the aquifer beneath Milltown, rendering much of the
communities’ groundwater unsafe for human consumption-unsafe as a result of
the toxic sediments behind the dam (Clark County Coalition, p. 7, 2002).
Although viewed as a significant public health issue, direct action
regarding the sediments was still a decade away. During the years leading up to
February 9, 1996, the Milltown dam was little more than a topic of concerned
47
discussion.
Late January and early February saw a cold snap of sub zero
temperatures that covered the Clark Fork and Blackfoot Rivers in ice. This cold
snap was followed by an extreme warming trend (commonly know as a
“Chinook”) which caused extreme melting and associated ice flows as the rivers
began to thaw. Above Milltown an ice flow measuring 10 feet in height, 40 feet
in width and flowing at a rate of 10 mph was heading straight for the dam. In fear
of a total loss, the dam’s superintendent ordered the spillways opened in an
attempt to save the dam. The ice stopped up river from the dam but the real
damage had been done. The ice flow scoured the river bottom and Milltown’s
spillways released a pulse of toxic sediment downstream.
Prior to the event, the
Environmental Protection Agency (EPA) was set to leave the sediments stored in
place behind the dam. After this incident, the EPA changed its mind. Three
months later the Montana Fish, Wildlife and Parks (MFWP) noted that the
downstream trout populations had been decimated (Devlin 2005).
Implications for Fish
Copper is known as the “fish killer”. According to Nowak and Duda
(1996), copper is one of the most toxic heavy metals to fish, especially during the
juvenile stage. Excessive amounts of copper causes stunted growth (predisposing
them to predation) and decreased antibody production of bacterial pathogens
(exposing them to disease).
In addition, fish exposed to high doses or
concentrations of copper often suffer from an altered gill structure affecting
respiration. As a result of the 1996 ice jam, sediment scour, and flow release,
MFWP estimated that, at a minimum, 50% of the downstream Rainbow and
48
Brown Trout population had been lost. To date, MDFW estimates that the river
only holds about 20% of its probable fish populations.
CERCLA
In 1983, shortly after arsenic was detected in the groundwater, the
Milltown site was listed by the EPA under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (CERCLA)-also known as
Superfund.
Prior to the enactment of CERCLA, industrial waste disposal
practices were jeopardizing public health and the environment.
Existing
environmental laws were inadequate in addressing these practices. CERCLA was
drafted with the legislative intent to fill this statutory gap and achieve effective
remediation of contaminated sites. Although not a comprehensive list, CERCLA
provides for the following:
•
Ensures that money is available for remediation by assigning liability (the
polluter pays).
•
Provides funds for various actions that site clean up may require from
assessment to the actual remediation effort.
•
Allows states and the federal government to recover costs associated with
remediation through litigation against private parties (polluters)
•
Requires that the contaminated sites be prioritized in terms of the risk
posed to the public and the environment (the National Priorities List or
NPL)
CERCLA is a complex statute whose scope is beyond that of this paper.
The following describes the steps required within the Superfund process:
Preliminary Assessment/Site Inspection (PA/SI)-Here an investigation of the
site conditions occurs and a determination is made whether or not the site requires
49
an immediate or short-term response action/s based on the threat to public health
and the environment.
National Priorities Listing (NPL)-As mentioned above, the EPA is required
under CERCLA to keep and maintain a list of those sites posing the greatest
threat.
Remedial Investigation/Feasibility Study (RI/FS)-During this part of the
process, the nature and extent of the contamination is determined. Also, an
assessment is conducted regarding site “treatability” and an evaluation of
treatment costs and potential is conducted. Here remediation alternatives are
developed, screened, and analyzed.
Public comment is also obtained and
analyzed.
Records of Decision (ROD)-The ROD represents the final determination of the
RI/FS process. The ROD represents the “decision summary” and documents, in
great detail, the entire process while providing justification for the preferred
remediation alternative. Again, public comment is obtained and analyzed.
Stakeholders-Opposed
Liability for the Milltown contamination and remediation was assigned
(under CERCLA) to two individual parties-Atlantic Richfield Corp. (ARCO), the
owner of both the Berkley Pit and the Anaconda Smelter and Northwestern
Corporation, the owner of the Milltown Dam. Both parties opposed remediation
of the site but for very different reasons.
Northwestern Corp. opposed the CERCLA determination of liability
arguing that as the owner of the dam, they are not directly responsible for the
50
contamination. The EPA determined that although not directly responsible, the
structure “significantly” contributed to the contamination (EPA).
ARCO, having no argument against the determination of the Berkley Pit
and the Anaconda smelter as the primary pollutant sources, took a somewhat
different approach. ARCO argued that the effects of Arsenic on human health
were exaggerated. In 1986 they funded a scientific study hoping to “disprove”
previous studies and show that Arsenic was far less toxic and believed. The
research team concluded that Arsenic represented an even greater risk to humans
than previously thought and recommended more strict federal standards regarding
acceptable levels (Knundsen 2004). ARCO was successful in repressing the
publication of the study for almost a decade (Knudsen 2004).
According to the Consent Decree (EPA) - an agreement signed by the
EPA, the state of Montana, the Confederated Salish and Kootenai Tribes, ARCO,
and Northwestern that includes negotiated terms for integrated remediation and
restoration which became effective April 10th, 2006, ARCO is financially
responsible for $83,380,000, Northwestern is responsible for $12,124,356, and the
state of Montana will contribute $7,600,000 (these funds originated from a
lawsuit settlement with ARCO).
Stakeholders-In Favor
According to the ROD, 98% of the public comments obtained throughout
the CERCLA process were in favor of dam removal and either total or partial
sediment removal (EPA 2005). This cohort included private citizens, state and
federal agencies, Tribes, and non-governmental organizations such as the
51
outspoken Clark Fork Coalition, Trout Unlimited, and American Rivers.
The
remaining 2% included the liable parties (obviously) and a small portion of the
public, who, it is assumed, did not trust the federal government would provide the
public health and environmental protection outcomes promised by the project.
There were a total of 3,853 individual public comments (excluding ARCO and
Northwestern) submitted, analyzed, and considered in the final Record of
Decision (EPA).
Alternatives Considered
As required by law, the RI/FS process requires that remediation
alternatives to include taking no action must be developed analyzed and
considered. The original RI/FS included ten alternatives, their level of long term
effectiveness, and their associated costs. The alternatives considered are briefly
summarized and listed in the table below:
Alternative
Level of Effectiveness Total Cost
Considered
($million)
1. No Action
Moderate
$17
2. Modification of Dam and Practices
Moderate
$20.65
3. Same as above w/Erosion and Scour
Moderate
$52.12
Protection
4. Modification of Dam/Practices
Moderate
$73.11
w/channelization
5. Modification of Dam/Practices
Moderate
$59.86
w/Periodic Sediment Removal
6. Dam Removal/Partial Sediment
Low$121.46
Removal/Treatment
Moderate
7. Dam Modification w/Total Sediment
Moderate$117.47
Removal (Lower Reservoir Area)
High
8. Dam Modification w/Total Sediment
Moderate$190.7
Removal (Entire Reservoir)
High
9. Dam Removal w/Total Sediment
High
$120.82
Removal (Lower Reservoir)
10. Dam Removal w/Total Sediment
High
$201.81
Removal (Entire Reservoir)
Table 7. Alternatives Considered. Adapted from the Milltown Reservoir Focused
Feasibility Study; EPA
52
The majority of the public comments mentioned in the previous section
were in response to the alternatives considered in the RI/FS process.
Interestingly, of those in favor of site remediation, the controversy and discussion
was focused not on whether the dam would come down, but how much sediment
should be removed.
Ultimately, the effectiveness and project cost would
determine the final outcome.
Record of Decision (ROD)
As required in statute, the Record of Decision for the Milltown site
documents the entire process (EPA). First submitted in 2004, the ROD was made
available and posted for public comment prior to finalization. The document
describes the preferred and selected alternative (total dam removal with partial
sediment removal-lower reservoir) and justifies the decision. The decision was
based on the fact that the toxic sediments were primarily isolated directly behind
the dam (probably as a result of the 1996 flood/scour event) and that the cost of
partial removal versus total removal was approximately $80 million less.
The question becomes, will this be enough?
Environmental and
Biological assessments (included in the ROD) estimate that the river and
groundwater will heal itself over time-four to ten years (again, according to the
experts). The project “ broke ground” in July of last year (Clark Fork Coalition)
and work will continue through 2009 at which point the Clark Fork and Blackfoot
will, for the first time in almost 100 years, flow freely.
53
Alaska and the Toxics Release Inventory (TRI)
“… denying that mining has a pollution problem is a little like denying that major
league baseball has a steroid problem.”
Scott Brennan, Director
Alaskans for Responsible Mining
Recognizing that an argument can be made that the Milltown case
represents past practices of time gone by in an area with few physical similarities
to Bristol Bay other than a harsh climate, consider that in 2000 the EPA listed
Alaska as the fourth largest polluter in the nation. According to the 2000 TRI
along with Nevada, Arizona and Utah, Alaska made the list due toxic releases
from mining facilities.
For the third consecutive year the hard rock mining
industry lead the country as the largest toxics polluter releasing 3.3 billion
pounds-47% of all toxics released by industry (EPA). The primary source of
Alaska’s toxics problem then was the Red Dog mine. Red Dog produced over 1
million tons of zinc and lead concentrate annually and in 2000, Red Dog was also
responsible for producing 83% of the state’s toxic releases-about 445 million
pounds worth. The 2002 TRI cited Alaska and Red Dog as the nation’s largest
polluters and upon the EPA’s release of the 2003 TRI, Alaska once again topped
the federal list of polluters and again, Red Dog was responsible. Of the 540
million pounds of toxics released in Alaska, Red Dog contributed 487 million
pounds 12
12
The sources of the remaining toxic releases were from Alaska’s Greens Creek mine and the Fort
Knox mine (EPA)
54
Chapter Summary
Open pit mines are essentially bulk tonnage strip mines where low-grade
ore, disseminated throughout the bedrock, must be crushed and soaked in
chemical solutions to extract the ore. The process requires that a massive amount
of earth be moved to produce a single ounce of gold or pound of copper. The
resulting tailings that can contain residual chemicals must be stored in ponds or
impoundments that are typically constructed by damming an existing creek valley
and diverting the stream.
Water quality issues associated with the tailings
impoundments have, historically, resulted in toxic conditions for both ground and
surface water on and off of the mine site.
Examples of environmental degradation as a result of open pit mining
have been widely documented in the lower 48 over the last 100 years but
Alaskan’s need look no further than their own Red Dog mine and the associated
impacts it has had on the environment to find an example. Since inception in
1997 the EPA’s Toxics Release Inventory has included The Red Dog in each of
its reports since 2000. As of 2003, not only is Red Dog the state’s biggest
polluter, it also owns bragging rights as the largest emitter of toxics in the nation.
55
Chapter 6
The Policy Dilemma
Red or Gold?
“The existing fishing industry and the residents of the area deserve a permitting
process based on sound science and a full and open public process. There needs
to be a thoughtful and thorough benefit/risk analysis…”
Gabrielle LeDoux, Alaska
State Representative, 36th
District-Kodiak and Lake
Iliamna regions
The issue before federal, state and local decision makers represents the
classic conflict between economic development and environmental protection and
conservation.
It boils down to two conflicted and highly polarized schools of
thought. At one end of the controversy are proponents of approving the Pebble
Project’s copper and gold mine who cite the need for more jobs for local
residents; transportation infrastructure to provide additional economic stimuli and
reduce the high cost of energy; and an economic base that provides stabilitystability that could last for the next 80+ years. At the other end of the spectrum,
those opposed to Pebble object to the scope and scale of the project not to
mention the potential environmental issues that have been associated with open
pit mining elsewhere. They argue that the Sockeye (Oncorhynchus nerka) or “red
salmon” as they are commonly referred to in Alaska have sustained Bristol Bay’s
human populations for millennia and continue to do so by providing the economic
backbone for not only the region, but also the entire state. They contend that the
toxics produced by the mine will contaminate the watershed and destroy the
Kvichak and other rivers important to salmon.
56
Taken to the extreme, the controversy can be summarized by asking what
is more valued-the world’s largest wild Sockeye salmon run, or the world’s
second largest gold deposit? Or, even more simply put-what is your favorite
color? Red or gold? Although many may agree that questions such as these
constitute the extent of policy debate, recognizing that the dilemma represents
drastic, permanent changes to an untouched landscape is much more helpful. In
addressing this dilemma it is therefore important to have a firm understanding of
what is being planned in support of mining operations at Pebble and how those
plans may negatively impact the environment.
The remainder of this chapter will discuss the primary elements of the
Pebble Partnership’s draft design plan and quantify the scope of the project in the
region. Environmental concerns specific to the plan will also be included to
address the potential costs (to the environment) associated with approving the
project.
The Pebble Plan
“My core message to all those with concerns about the project is that I appreciate
at first hand, the beauty and value of all Alaska’s natural resources… I firmly
believe that [Pebble] can be developed…into a mine that goes well beyond
industry standards…”
Cynthia Carroll, CEO
Anglo American-Speech
before AK Resource
Development Council
A large scale mine in the region will require the development of
infrastructure to include energy, transportation, and operations. Although not
57
finalized, the Pebble Partnership has drafted a plan that would support the
extraction, processing, and delivery of ore to market. It includes a 104 mile single
lane road and adjacent pipeline 13 from the mine site, around Lake Iliamna,
terminating in Cook Inlet’s Iniskin Bay on the northeast coast of the Alaska
Peninsula (Figure 15.). There a deep water port would be developed to support
shipping of the ore for additional processing or to market and as a receiving site
for mining operations consumables.
In addition, the Partnership has “partnered” with the Homer Electric
Association (HCA), a member-owned cooperative serving the Kenai Peninsula in
reviewing options for providing power to the site (Pebble Partnership 2008).
According to the Pebble Partnership’s website, preliminary plans include the
development of a new power plant on the peninsula and a submarine power cable
to the proposed port site.
Proposed
Road
Figure 15. Proposed road and pipeline. (adapted from Pebble Partnership)
13
The pipeline would transport ore concentrate to the port and return the wastewater to the mine
site (Pebble Partnership)
58
The mine site itself will have a footprint of approximately 30 square miles
(Hauser 2007) with the main components being the actual mine pit, crushing
plant, ore processing plant, tailings storage facilities, and water treatment facility
(Figure 16.).
In 2007 NDM estimated the current Pebble resources at 8.2 billion tons
(70 billion pounds of Copper, 81.7 million ounces of Gold, and 4.05 billion
pounds of Molybdenum) the majority of which (about 98%) will remain on site as
waste or “tailings” (Chambers 2007). If the entire resource were developed, over
12 billion tons of earth will need to be moved creating huge amounts of waste.
Figure 16. Pebble Mine Operations (Pebble Partnership)
Tailings
The Pebble Project will generate two types of tailings 1.) cover rock material, and
2.) material from the ore zone. The material from the ore zone will no doubt,
contain some amount of ore depending upon the cut off used for classification
(waste or ore) by NDM and Anglo American.
59
Environmental Concern Associated With Tailings
The primary concern regarding mine waste is water quality and the
potential for acid mine drainage.
Acid mine drainage occurs when sulfide
minerals in the waste rock are exposed to air and or water forming sulfuric acid.
The acid leaches out minerals in the waste rock. Minerals such as arsenic, lead,
zinc and copper can leach from waste rock and contaminate both ground and
surface water.
At the proposed Pebble site, in a region comprised of 75%
wetlands and streams that support the world’s largest salmon run, this is of
particular concern. Both the Kvichak watershed and the Nushagak watershed are
down gradient from the proposed mine and therefore threatened.
Figure 17
depicts those rivers and streams that would be directly impacted by Pebble.
Chulitna R.
Koktuli R.
Newhalen R
Stuyahok R.
Upper/Lower
Tularik Cr.
Figure 17. Rivers directly threatened by potential for contamination
60
The interaction between ground and surface water is well documented and
given the importance of hydrology and clean water to salmon for spawning and
rearing, the potential for contamination is significant and raises the question of
acceptable levels.
Opponents of the mine argue that any contamination
whatsoever is unacceptable and according to a recent study, their claims have
merit. Researchers at the Northwest Fisheries Science Center in Seattle, WA, have
found that copper concentrations of just 2-20 ppb can destroy a salmon’s sense of
smell (Baldwin, et al. 2007). Salmon rely on their sense of smell to detect their
natal streams (Quinn 2005). Contaminated rivers could become devoid of salmon
simply due to the fact that the salmon are not able to home in on their respective
spawning grounds. This could have other impacts as well. The salmon could die
prior to spawning in search of their natal stream, or they could inhabit other,
uncontaminated watersheds creating overburden on a system that may not be able
to support them.
According to Bruce Switzer, Ph.D. and former Director of environmental
affairs for Cominico at the Red Dog mine, water quality issues abound at the
proposed Pebble site. Switzer reminds us of the unanticipated precipitation and
permafrost melt that caused acid mine drainage flooding and resulted in the
contamination and associated fish kill at Red Dog creek. Switzer also considers
Pebble to be a much more difficult region to mine than Red Dog given that the
region receives 4 times the precipitation and the water table is at the surface.
(Switzer 2008).
61
Tailings Storage
In response to the need to adequately store tailings, NDM and Anglo
American propose to build 5 earthen dams encompassing over 10 square miles
and filling two valleys in order to store in perpetuity the acid producing waste
(Roosevelt 2007). The “non-acid producing” tailings material would be utilized
to construct the impoundment, which, would be fitted with a liner to prevent
seepage and protect the integrity of the structure. The liner would not be utilized
for the purpose of creating a barrier between the tailings and the base of the
impoundment. The base of the impoundment is glacial moraine and mortar will
be used as a supplement to prevent seepage (Chambers 2007).
Environmental Concern Associated With Impoundments
The primary concern is with tailing impoundments is also one of water
quality and acid mine drainage due to structural failure. Additionally, and in
order to support the impoundments, the existing landscape will be changed
forever.
In 2006 NDM submitted plans to create two tailings storage facilities
requiring dewatering of the Nushagak watershed’s South Fork of the Koktuli
River, a tributary of the North Fork of the Koktuli River and the Kvichak
watershed’s upper Tularik Creek . Two of the required dams needed to hold the
tailings would be larger than China’s Three Gorges Dam (Figure 18.), one of
which would be the largest dam in the world standing 740 feet high and 4.3 miles
long (AKDNR).
62
Figure 18. China’s 3 Gorges Dam (TravelChinaTour.com)
Structural failure can occur as a result of seepage and erosion and in North
America’s most active seismic region; failure as a result of seismic activity is of
particular concern (Chambers 2007). Although the Pebble Partnership’s website
proclaims that, “tailings embankments at Pebble will be built to withstand seismic
events larger than could happen in Alaska” (2008), Steven Vick, a leading tailings
dam expert, noted that “As time goes on, the largest event to have been
experienced can always be exceeded” (2001). Even if a major event never occurs,
multiple smaller events can, over time destabilize and weaken earthen structures
causing landslides and breaches. Alaska has more earthquakes annually than any
other state (Figure 19.) and is one of the most seismically active regions in the
world experiencing a magnitude 7 earthquake each year and a magnitude 8
earthquake about every 14 years (USGS 2008).
63
Figure 19. Alaska Earthquakes 1975-Present (USGS).
In fact, according the University of Alaska Fairbanks Earthquake Information
Center, there were 154 earthquakes worldwide in the 48 hours between 4pm May
5th and 4pm May 7th, 2008-142 of them were in Alaska.
Ore Processing
Although the Pebble Partnership has not disclosed the methods by which
they will extract the ore from rock it can be assumed conventional methods will
be utilized. Procedurally, and in simplistic terms, after the ore is crushed it is
transported to on site flotation tanks and undergoes a series of flotation operations
where chemicals are added to separate the sulfide minerals from the host rock.
The final flotation occurs in the tailings pond where a pyrite concentrate is added.
This material is highly reactive and must remain submerged to inhibit the
development of acid mine drainage (Chambers 2007).
64
Environmental Concern Associated With Processing
Again, the primary environmental concern is water quality.
chemicals from the process will remain in the tailings pond.
Residual
According to
Chambers (2007) most chemicals utilized to separate the sulfide minerals are
organic and therefore degrade in the environment. However, Chambers is quick
to point out that the degradation of some process chemicals produce byproducts
such as ammonia which is toxic to aquatic organisms.
When asked, the Pebble Partnership has not ruled out the use of cyanide.
Therefore, it can be assumed that its use is being considered and a subsequent
discussion is warranted. According to the Mineral Policy Center (2008), cyanide
compounds are widely used by the mining industry to assist in the extraction of
metals from rock. In gold mining, a dilute cyanide solution is sprayed on crushed
ore that is placed in piles (heaps), or mixed with ore in enclosed vats. The cyanide
attaches to minute particles of gold to form a water soluble, gold-cyanide
compound from which the gold can be recovered. Cyanide is used in a similar
manner in the extraction of non-precious metals, such as copper and
molybdenum. Consequently, cyanide is often found in discarded mine wastes.
Mining and regulatory documents often state that cyanide in water rapidly
breaks down in the environment into largely harmless substances, such as carbon
dioxide and nitrate. However, Moran (2000) states that cyanide also tends to react
readily with many other chemical elements and is known to form, at a minimum,
“hundreds of different compounds.” Many of these breakdown compounds are
generally less toxic than the original cyanide, but are still known to be toxic to
65
aquatic organisms. These breakdown compounds may persist in the environment
for an unknown period of time, and there is evidence that some forms of these
compounds can accumulate in fish and plant tissues (Moran 2000).
The water quality at and around the mine site is not the only concern.
Once separated from the host rock, the ore will travel along side the 104 mile road
to Cook Inlet. There the water will be separated from the ore and returned via
pipeline back to the mine site for treatment and/or storage. As this water is toxic,
failure of the pipeline in either direction could have extreme environmental
impacts on salmon and wildlife habitat outside of the Kvichak and Nushagak
watersheds. From the port at Cook Inlet, the ore will be loaded on to ships that
are subject to disaster as was the Exxon Valdez. The result could negatively
impact coastal habitats.
Chapter Summary
The Pebble Partnership’s plan to develop approximately 30 square miles
of the Bristol Bay region represents a serious dilemma for federal, state, and local
decision makers. Approval of the mine could increase the quality of life for local
residents through high paying jobs, increased transportation infrastructure, and
decreased cost of goods and energy. It would also generate millions in revenues.
This, on the surface, sounds appealing until one considers the potential impacts of
the project. It is when considering those impacts that the question of legacy
comes in to play. Decision makers and local leaders, probably more so than the
rest of us, contemplate their legacy.
Generally speaking, they want to be
remembered for accomplishments and making decisions that benefited their
66
constituents or followers. Decision makers, primarily Alaskan decision makers,
are faced with three possible, if not probable legacies associated with this difficult
issue. First, they could approve the mine and the project could be managed and
operated as promised (co-existing with healthy fish populations). This scenario,
although unlikely given the mining industry’s track record, represents a win-win
situation for all stakeholders.
Secondly, they could approve the mine and
environmental degradation and loss of species could occur. This scenario would
leave behind a legacy marked by a willingness to sacrifice a resource that belongs
to all for the benefit of but a few. Finally, they could deny the project and in
doing so be accused of not caring about the well being and quality of life of the
local residents who are in desperate need of opportunities to prosper. With this
scenario there is an opportunity for decision makers to meet the development
needs of the people of the region-an opportunity for sustainable economic
development.
Chapter 7
The Economic Gap
Quantifying the Choices
Sound regulatory decision making relies upon numerous factors-not the
least of which is political feasibility. In addition, a firm understanding of and
grounding in the issue/issues; compliance with existing statures; future
implications; and, quite often, a cost benefit analysis are essential elements.
Regarding the Pebble project, and given the environmental concerns, it is possible
that the decision to approve the mine could significantly impact fisheries in
67
Bristol Bay-a resource that, at present, is the foundation of the regional economy.
In fact, opponents of the mine cite impacts to fisheries as the primary reason for
denying Pebble permits and applications. It is therefore important for decision
makers to weigh the potential economic benefits of mine approval against those of
Bristol Bay’s fisheries to identify the gap between the two.
Economic Benefits Associated with Mine Approval
Estimating with any degree of certainty, the economic benefits of a project
still in the development stage requires the application of assumptions and the
elimination from the discussion of potential benefits due to insufficient
information. Pebble is no exception as the project is still in the pre-feasibility
phase of development.
In addition, the price paid for mineral commodities
fluctuates depending on market demand, which has had high historic volatility.
Therefore, the benefits associated with Pebble will be limited to quantifiable
information published by NDM to date. Because of this, the benefits discussed
within will not represent a comprehensive list. For example, NDM has promised
service and supply contract opportunities but at this stage of the project, has not
provided specific details. As a result, this element of the potential economic
benefits will not be included. Similarly, the Pebble East underground resources
have been confirmed and drilling to date estimates a total resource of 3.9 billion
tons (49 billion pounds of copper, 45 million ounces of gold, and 2.8 billion
pounds of molybdenum) (NDM 2008).
Pebble East is currently undergoing
additional delineation drilling, the results of which are not expected until late
68
2008 or early 2009. Until the Pebble East deposit is fully delineated, NDM will
not publish data required to estimate annual production. 14
Regardless, it is unlikely that the site will utilize two mills; 15 in fact
NDM’s draft plans indicate a single mill will be utilized with the capacity to
process 200,000 tons of ore per day. In addition, as the Pebble East deposit has
not been fully delineated, determining the life of the mine also becomes
problematic. For the purpose of this discussion and according to NDM, a 100+
year mine operation is not unrealistic. 16
Data from NDM’s investor center
estimates annual revenues at just under U.S. $1 billion annually (Table 8.) with
copper production making up 60 percent of combined revenue total. NDM’s
economic modeling is based on current market prices for gold and copper, now at
historic highs in inflation-adjusted dollars.
Table 8. Pebble Production
Total
Production
Annual
Revenue Percentage
(200k tbd)
Production
(million) of Revenue
Copper
580 mil. lbs.
580
57
Gold
680 thous. oz. 272
32
Molybdenum 20 mil. lbs.
120
11
calculated at US $1/lb copper, $440/oz Gold, $6/lb molybdenum
Alaska taxes mining in three distinct ways-through a mining license tax, a
corporate net income tax, and through a net income royalty (Alaska Office of the
Assessor). Because each is based on the corporation’s net income, the state sees
little in the way of revenues. According to Alaska State Representative Paul
Seaton, while state revenues from oil and gas production amount to approximately
14
Personal communication with NDM Director of Investor Services.
Personal communication with Steven Chambers, Ph.D-Mining Expert. Utilization of more
than one mill is typically cost prohibitive. It is much more likely that additional deposits would
extend the life of the mine rather than increase annual production.
16
Personal communication with NDM investor center representative.
15
69
20% of the total production value with an additional 2% paid to the local
municipality, the mining industry pays the state less than 1% (.7%) and the local
municipality receives 1% (AK Dept. of Revenue). According to NDM’s figures,
their annual contribution to the state would be $68 million while the local
jurisdiction would receive $97.2 million annually for a combined total of $165.2
million in revenue payments.
The other quantifiable benefit that NDM has published relates to
employment opportunities. The project has promised to provide 1000 long term
jobs for local residents throughout the life of the mine. They have promised an
annual average salary of $80,000 (2008 dollars) for these positions. The state of
Alaska does not have an income tax nor does it levy a sales tax. Rather, the
state’s constitution grants broad authority to jurisdictions and municipalities and
there are very few taxable exemptions required by law (Alaska Division of
Taxation). This allows local jurisdictions to levy sales, use (levied on the storage,
use, or consumption of goods), and other taxes as approved by voters (Alaska
Division of Taxation). Table 9 indicates taxable items for the Bristol Bay region.
Table 9. Bristol Bay Regional Taxes
Property
Sales
Municipality Tax
Tax
Bristol Bay
Bor.
Yes
No
Dillingham
Yes
6%
C.A.
Lake
&
Peninsula
No
No
Bor.
Alaska Division of Taxation
Use Tax
3% Fish, 10% Bed
10% Bed/Liquor, 6% Gaming
2% Fish,2% Guide, 6% Bed
The increase in jobs and associated wages provided by Pebble would not provide
revenues for the state. With the exception of the city of Dillingham, the increased
70
salaries as a result of the Pebble project would have little impact on revenues for
the local jurisdictions as the use taxes are designed to capture revenues from
sources outside the region such as tourists and those participating in the
commercial fishery. However, it does provide for purchase power. The jobs
promised by Pebble create an annual gross parole of $80 million.
Economic Benefits Associated with Fisheries
As with the mining industry, fisheries experience fluctuation in not only
Ex-vessel value (market value of the fish sold) but also in annual run size which,
as discussed in chapter 3, has varied between 30 and 50 million fish annually in
Bristol Bay. Recently, and as a result of the influence of farmed fish has had on
the market value, the run size has had little impact on ex-vessel prices.
According to the Alaska Commercial Fisheries Entry Commission (CFEC)
(2004), nearly one third of all earnings from Alaska’s salmon fishing industry
comes from Bristol Bay.
In 2005, about 1,600 local residents (617 permit
holders, 979 licensed crew members) participated in the salmon harvest and in
doing so, grossed $11.26 million or, 25% of the total gross earnings. In addition,
802 Alaska residents from outside the region captured 32% of the harvest earning
$14.42 million.
Another 454 Alaska residents participated in processing the
harvest earning $3.6 million 17 . Combined, Alaska residents participating directly
in the harvest and processing of the 2005 run grossed $29.28 million. 18
17
18
Data on local resident processing jobs and associated pay role is not currently available.
Authors calculation from Department of Labor data.
71
The 2005 harvest represented a total Ex-vessel value of just over $45
million (ADF&G 2005) generating approximately $662,000 in local fish tax
revenues (Table 10.)
Table 10. Bristol Bay Regional Fish Tax Revenues
%
of
Harvest
based
on Value of catch ($
Jurisdiction
million)
total catch
Bristol Bay B.
27
12.16
Dillingham CA
40
18.02
Lake & Peninsula
33
14.87
B.
Author's Calculation (ADF&G, Dept. of Labor)
Fish
Tax
Revenues
$365k (3%)
No Tax
$279k (2%)
In addition to local revenues, the state of Alaska levies taxes on the
harvest. The Alaska Department of Revenue (DOR) collects fisheries business
taxes, fishery resource landing taxes, a salmon marketing tax, and other seafood
taxes from licensed seafood processors and exporters (DOR website). In 2004,
the state of Alaska received approximately $53.5 million in fisheries revenues
(2005 data not yet available) of which approximately $17.65 million comes from
Bristol Bay.
Alaska’s sport fishing industry supports over 12,000 jobs with an
associated pay role of $259 million and direct expenditures from non-residents in
excess of $640 million (ASA 2003). Today, there is a data gap that the ADF&G
is addressing.
They are currently collecting data to quantify the economic
impacts of sport fisheries for specific fisheries. Their final report is due in early
2009 (see chapter 3, sport fisheries). Although specific information such as
number of local jobs and associated pay role is not available, according to the
Bristol Bay Health Corp., it is estimated that the Bristol Bay sport fishery
generates between $50 and $60 million annually (Bristol Bay Health Corp. 2008).
72
This revenue generation is conceivably sustainable in perpetuity, assuming the
resource continues to be well managed.
As discussed in Chapter 3, Bristol Bay’s fishery drives the regional
economy and economic benefits associated with the annual salmon run provide
the basis for other sectors such as goods and services (not to mention the
unquantifiable- but real- cultural value of traditional fishing to indigenous
inhabitants). It could be argued that those same sectors could be driven by the
activities of the Pebble Project and, as a result, will not be included in the
discussion.
Chapter Summary
Based on the above, the Pebble Project would provide a direct economic
benefit of $242.5 million annually ($68 million in state revenue, $97.2 million in
local revenue, and $80 million in pay role). In contrast, the annual economic
benefits of the regions fishery provides a direct economic benefit of $102.59
million ($29.28 million in commercial fishery earnings, $662 thousand in local
revenues, $17.65 million in state revenues, and approximately $55 million in
direct spending related to sport fisheries) (2005 data) indicating a deficit of
$139.61 million annually.
The potential “costs” of these two economic sectors must also be
considered-in this case, the environmental costs. Regarding operation of the
mine, the environmental costs are considerable.
As discussed in Chapter 6,
habitat will be lost in perpetuity with the development of dams, roads, and tailings
storage.
Additionally, the environmental concerns associated with mineral
73
extraction specific to Pebble could result in the benefit of one resource (minerals)
at the expense of another (fish).
In contrast, Bristol Bay’s fisheries do not
represent a cost. They have been and continue to be managed sustainably.
Chapter 8
Additional Considerations
Interestingly, it is the undeveloped landscape and pristine habitats that
serve to both provide for the residents of the Bristol Bay region and inhibit
additional economic prospects. Challenges such as the limited opportunities for
employment and the high cost of goods and services (especially energy) make
proposals such as the one presented by the Pebble Project appealing-especially
given the significant gap ($139 million annually) between approving the proposal
as opposed to insuring a sustainable fishery. I propose that $139 million is a
small price to pay for a healthy, in tact ecosystem and challenge Alaska’s decision
makers to consider the following:
Recommendations
One of the most significant expenses facing the residents of the Bristol
Bay region is the high cost of energy. Bristol Bay, like most of rural Alaska’s
energy economy is supported by fossil fuels-primarily diesel (costing as much as
$6/gallon) for electricity generation.
According to the U.S. Department of
Energy, current resources indicate that Alaska has sufficient wind resources to
support both large and small scale wind power (2008). In fact, Bristol Bay’s
coastal region wind resources potential is considered “outstanding”, including
inland areas that encompass the communities around Lake Iliamna (Figure 20.).
74
These resources indicate the real potential for development of wind generated
power and a transition to a less expensive, sustainable energy economy.
Lk. Iliamna
Figure 20. Alaska Wind Power Classification (USDE)
Alaska’s decision makers and organizations such as the Bristol Bay
Natives Corporation (BBNC) should consider developing wind as not only an
alternative energy resource, but also as an opportunity for additional income for
regional residents. Organizations such as the American Wind Energy Association
(www.awea.org) and Native Wind (www.nativewind.com) provide technical and
financial assistance for qualified programs (those that can demonstrate carbon
offsets, etc.) which could go a long way in reducing the start up costs and required
infrastructure. In addition, a co-op could be formed that would offset the cost of
wind energy for individual users based on annual consumption and pay dividends
for those who practice conservation.
Secondly, Bristol Bay’s pristine environment is a resource that warrants
further development of eco-tourism income opportunities. The regional sport
fisheries have benefitted the state economically to the tune of approximately $50
75
million annually while representing a missed opportunity for local residents who
see little in the form of economic benefits as a result. Decision makers should
implement a “user pays” policy regarding the sport fishery as most of the area
lodge owners and guides are from outside the region. By levying a user tax for
the benefit of the region’s inhabitants, the state could insure that some of the
economic benefits remained within the region. There is also an opportunity for
the BBNC to establish “Borough Lodges” as an addition to their holding company
portfolio. These lodges would be owned by the residents who would also be
employed by the lodge. Small business low or no interest loans provided by
either the state, borough, or BBNC could also stimulate local resident lodge/guide
development and in doing so, assist in tapping into the sport fishery resource.
In addition, the commercial fishery is in desperate need of increasing the
Ex-vessel price of the catch. ADF&G, the Limited Entry Fisheries Commission,
and the fishery’s marketing associations should consider allowing alternative
methods of harvest that could potentially produce a better quality product while
maintaining current management practices. In addition and with the current trend
in wild, organic, free trade products, Bristol Bay’s commercial harvest is situated
to out compete farmed fish and should be marketed as such. Also, a permit buy
back program could reduce the “race for fish” by reducing the size of the fleet.
This could have positive impact on the individual Ex-vessel price.
Also, decision makers should consider the current status of Pacific Salmon
populations in the Pacific Northwest. As a result of overharvest, development
activities, and hatcheries, wild salmon populations in Washington, Oregon, and
76
California have been reduced to a fraction of their historic abundance
(Montgomery 2003).
As icons of the region, millions of dollars are spent
annually in habitat restoration activities to restore salmon populations in natal
watersheds. Steps to avoid similar outcomes in Bristol Bay should be at the
forefront of any policy decisions for the region.
Finally, it is evident that a data gaps exist regarding the Bristol Bay ecoregion. Opportunities for additional research, especially hydrological data for
both the Kvichak and Nushagak watersheds, should be undertaken prior to
approving Pebble.
In addition, it is very important to fully understand the
economic benefit of the regions fisheries. There exists an adequate body of
knowledge regarding the commercial fishery. However, little is know regarding
the economic impact of the sport fishery with respect to local resident
participation and associated benefits. ADF&G is in the process of quantifying
this important economic sector and their work could provide the basis for
additional policy considerations for maximizing the potential of this resource for
local residents.
Conclusion
The choice facing policy makers in Alaska cuts to the core dilemma of the
human enterprise: the conflict between the distribution of costs and benefits.
Whether to sacrifice an in tact natural system with, i.) abundant natural capital
that, ii) provides priceless ecosystem services (priceless because they are not
valued under our current economic framework) iii.) for many people, iv.), for
many generations, for the short-term economic benefit (profit) of a corporation
77
and the few who will benefit directly (salaries, investor dividends). In economics,
this issue comes down to “substitutability” vs. “complementary” (Daly, Beyond
Growth, 1997). The assumption under our current economic framework is that
natural capital (forests, rivers, salmon), and the ecosystem services they provide
(clean water, air, climate regulation) are “substitutable” with capital (money),
meaning they can be equally substituted for one another. But as natural capital
becomes increasingly scarce (due to development, habitat degradation, climate
change), no amount of money can buy back an intact, functioning ecosystem, so
natural capital and money are actually “complements”. At some point in the
future, those additional dollars created by development will not provide future
generations with the clean air and water (and in this case, salmon) they will need
to live. As a result, future generations will spend any amount for those ecosystem
services (eg. the Milltown Dam removal for clean water for Missoula and healthy
fish populations). Moreover, current economic modeling tends to use discount
rates which “discount” the future, meaning that short-term economic benefits tend
to be pulled to the current generation while the costs (typically environmental)
tend to get pushed out to future generations. Therefore, typical cost-benefit
analysis does not provide a comprehensive picture of the costs and benefits,
especially since many environmental costs can be externalized. Additionally,
there are evolving ecosystem service markets (eg. for water-FONAG, carbonKyoto) which may provide opportunities for additional economic benefits from
conserving intact ecosystems such as the Bristol Bay region, which are not
currently assumed in a Cost-Benefit Analysis.
78
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