Alaska has not increased its state tax rates on mining since before statehood.
In any review of Alaska’s state revenue picture, this is a startling fact, one that legislators and governors have ignored for generations. For the last 45 years, the ready flow of oil dollars from taxes and royalties has prevented any real analysis of the matter.
The foreign mining companies that dominate the industry in Alaska will be the first to say the taxation system on mining is perfect, except the state should strip local governments of the ability to levy added mining taxes.
“Alaska’s current mineral taxation system does not need to be revised. The system is comprehensive and fair to the state and the industry,” the companies declared in 2019.
That’s fine, but consider the source, an industry that has had the final say on the matter in Alaska since 1955.
The annual survey of the mining industry places Alaska 5th on the list of the most attractive places in the world for mining investment. In the U.S., only Nevada and Arizona rank higher.
In terms of taxation alone, Alaska is also the fifth most popular spot in the world among mining companies, ahead of Idaho, Utah, Nevada, Wyoming, Western Australia, Montana, South Australia, Saskatchewan, New Mexico, Yukon, Peru, Chile, British Columbia, Colorado, Manitoba, Washington, South Africa and Brazil.
One of the takeaways from a legislative hearing on the disorganized grab bag that constitutes the state tax picture is that the mining tax is long overdue for review. So is the exceptionally low net profits royalty rate.
It’s way past time to test the robotic industry assertions that any tax or royalty increase would be fatal to jobs and investment. It’s way past time to test the assertion that mining companies should never be asked to pay more.
Here is one specific related to the growing impact of mining on Interior Alaska’s roads that the state doesn’t want to talk about when measuring the costs of development.
Fort Knox, owned by the Canadian company Kinross, is shifting its operations to depend on more trucked-in rock, including a plan to have trucks making 88 daily roundtrips from Tetlin to Fort Knox, operating 24 hours a day, starting in 2024.
At that rate, there would be a truck going either direction every 8 minutes for five years. The state should be looking at, among other things, the impact on roads and traffic of moving 7 million tons of rock on nearly 200 miles of public roads.
The company plans to haul 3,900 tons of rock per day from Tetlin to Fort Knox, reducing operations only when seasonal weight restrictions require lighter loads, especially during breakup. There will probably be pressure on the state to relax the weight limits.
The promotional materials for the Manh Choh project say that by using existing infrastructure, which includes the Richardson and Steese highways, the project is on the fast track and will produce more profits. The promotional materials don’t mention anything about Kinross and the state’s dwindling budget for road repairs.
Who is looking out for the state’s interest? What will the heavy trucks mean to road maintenance, highway safety and other drivers in the years ahead? What steps will be taken to prevent more accidents? How will operations in bad weather impact the region, especially during the months when blowing snow and ice are constant hazards?
These are all matters that no one has dealt with in the open with dollar figures attached, as the advocates want to confine the discussion to jobs in Tetlin and Fairbanks and revenues to state and local governments and the Tetlin tribe.
But that’s only part of the picture. The rest of it—good and bad—needs to be analyzed and understood by the public.
The plan to truck gold-bearing rock to Fort Knox is a low-cost, “attractive high-margin project that is expected to generate robust returns,” Kinross Gold President J. Paul Rollinson told investors last year.
The project is being financed in part by the Alaska Permanent Fund, with $10 million from the Alaska Future Fund going to Contango Ore, a 30 percent partner in the joint venture. One question raised by the involvement of the Permanent Fund is whether this is a politically driven investment or one decided on economics.
There is a balance that must be achieved for high margins and robust returns for a private company and the costs to Alaska’s public transportation infrastructure. More disclosure is necessary.
Likewise, finding the right balance on mining taxes requires a full examination, not one that merely represents the one-sided point of view of international mining concerns.