A lot of concern is being raised about a proposed 211-mile industrial access road proposed to be built from the Dalton Highway to the Ambler Mining District in the western Brooks Range.
Mining companies have made discoveries of copper and other metals and the road, which would be built by the state’s development finance agency, the Alaska Industrial Development and Export, would give companies a way to shop ore by truck.
Residents of Alaska Native villages worry that the road will bring sports hunters and fishermen into the region, potentially depleting subsistence resources on which the villagers depend. Conservation groups are concerned about the extension of a road into a large, undeveloped area that is wilderness for all practical purposes.
Meanwhile, a lot of people are concerned about the state financing and building a road for mining companies and getting stuck with $300 million to $500 million in construction costs if the mine, now in the exploration phase, don’t pan out. The U.S. Bureau of Land Management is taking public comments on a Draft Environmental Impact Statement for the road until Oct. 29.
What isn’t clear to many, however, is that what would be approved by the BLM, if it is approved, is essentially a road corridor. It would not result in a road until enough ore is proved up and companies decide to actually construct a mine.
Because of the remote location it’s still uncertain that companies will make that decision even with a road corridor approved by BLM.
AIDEA, for its part, will not sell bonds to finance the road unless mining companies sign agreements to pay for the road through a tariff, or fee, for trucking ore. The state authority would sell revenue bonds, which are bonds sold only if there is a pledge from a user of infrastructure to pay debt service on the bonds.
Revenue bonds are different than state general obligation bonds, which must be approved by voters in a general election and which can be used only for public facilities, not private-use infrastructure. The protection for the public with either revenue or general obligation bonds is that debt rating agencies like Moody’s or Standard and Poors scrutinize the bonds and the creditworthiness of the entity, the state or a private user, responsible for payments.
Rating agencies will also look carefully at the mine proposal. In the case of the Ambler road now proposed this would be the Arctic deposit being explored by Trilogy Metals, a Vancouver, B.C. exploration company, along with South 48, a large Australian mining company.
A mining company will have to be substantial and have deep pockets to pass this test, because it will be paying for the mine development as well as for the road in tolls paid over time. There have been other ore discoveries in the region.
Besides Arctic there are 12 other mineral accumulations identified by companies exploring in the region which haveave the potential for developing 250 million tons of potential mineral resources, according to Rick Van Nieuwenhuyse, senior consultant to Trilogy and the company’s former CEO. The road would open access to the region, which is now isolated from surface access.
AIDEA hopes the other discoveries will be developed after Arctic, and they would help pay for the road through additional tolls.
AIDEA calls this approach the “Red Dog” model because it is essentially what was done for development of the Red Dog Mine, which is northwest of the Ambler Mining District in the DeLong Mountains, a part of the western Brooks Range. Red Dog is a rich lead-zinc deposit tat has been in production since 1989, and is one of the world’s largest zinc mines.
A 60-mile road connects Red Dog to an ore loading port on the Chukchi Sea. The port operates seasonally, during the ice-free summer, but the mine operates year-around and stockpiles its ore.
AIDEA financed the Red Dog road and port with revenue bonds. Those have since been paid off and the authority now earns a 6.5 percent annual profit on its investment in the road and port, which it owns. A similar arrangement would be made for any mines developed in the Ambler district.
It is true that if the new mines go belly-up AIDEA would get stuck with paying for the bonds but the responsibility would be on the authority, an independent state corporation, and not the state itself. AIDEA has substantial financial resources of its own and in the worst case would be able to pay off the debt.
However, this is why the scrutiny of the bond rating firms is important because it provides an independent review of a financing proposal.
The road would also have economic benefits for people who live in the region, mainly residents of small villages. It would allow fuel and other supplies to be brought in at lower costs. But there are concerns, too. Subsistence hunting and fishing is crucial to local villagers and there are fears that the road would open access to sports hunters and fishermen who would deplete local wildlife.
Although the road would be for industrial use only and not open to public use, except for local residents to bring in supplies, there is still worry that political pressure from sports groups on the Alaska Industrial Development and Export Authority, the state’s development finance corporation that could build and own the road, would result in it eventually being opened to public use.
Precisely this happened years ago when the Dalton Highway was built to the North Slope. The North Slope Borough, the regional municipality for northern Alaska, has secured assurances from the state that there would be no public access to the road north of the Yukon River. Fairbanks sport-hunting groups sued the state over this and won, resulting in the Dalton becoming a public highway.
However, there are examples of private industrial roads being successfully managed. One is a 50-mile road to the Pogo gold mine from the Alaska Highway near Delta. Northern Star Resources, an Australian mining company, owns the road and operates a security checkpoint to assure limited access that includes people who own recreational cabins in the area.