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Small mines struggle to survive.

Small mining operations may not qualify as the workhorse of the industry in terms of production in Alaska; dollar for dollar, larger mines easily outpace them. "But in terms of numbers of people employed, the small mine is probably right up there," says Dick Swainbank, an economic development specialist with the Alaska Department of Commerce and Economic Development.

Of concern to industry analysts, the state's small-mine operators are finding it increasingly difficult to pursue their livelihoods these days. Many areas once open for exploration now are off-limits. Further, regulations governing water quality, land reclamation and other environmental standards have increased operating costs and can make permitting a seemingly endless, frustrating task.

Also, the nation's 120-year-old mining law is under fire, leaving miners feeling that the industry itself is under attack.

Some industry analysts suggest small-time mining is fated to become extinct. The laundry list of changes in restrictions, regulations and fees that have gone into effect or that are under consideration, at both the state and federal levels, suggest that at best, their survival is threatened.

In the past year, bonding, which is intended to ensure that miners restore lands, has been a topic of much controversy. Although a moratorium on new regulations at the federal level this summer meant U.S. Bureau of Land Management bonding proposals were put on hold, those proposals are expected to become law.

Regulations likely will require bonding of $1,000 per acre during exploration, $5,000 for each notice-level (five acres or less) operation, and $2,000 per acre for a plan-level (affecting more than five acres) operation. A state law already in effect requires bonding of miners on state lands. Regulations being drafted would make miners on private lands similarly liable, affecting even operations on Native corporation property.

Fortunately, the state statute includes provisions for a bonding pool, an option that, at least initially, would significantly reduce the economic impact on individual miners. The pool was designed to help affected miners comply with state bonding requirements, but provisions in the act left the door open for participation by other miners as well. The bonding pool would serve as a kind of self-insurance among miners, to whom traditional surety bonds are no longer available.

The pool would assume a certain level of non-compliance, and contributions would be calculated accordingly. The plan remains unproven, though.

Notes economic development specialist Swainbank, "It'll probably be a year or two before people find out what the actual cost of reclamation is."

Another proposed out-of-pocket expense is a $100, cash-only annual mine claim holding fee, included in this year's Department of the Interior and Related Agencies Appropriations Act.

Opponents point out that the majority of revenues generated by the fee would go into the general fund and be spent on programs that have nothing to do with mining. They also anticipate that the fee will discourage small miners and result in less income than has been projected.

Meeting discharge standards also worries miners. Since passage of the Clean Water Act 20 years ago, miners have been subject to increasingly stringent water-quality regulations. Treatment requirements have increased from simple settling ponds to the current mandate that all process water be recycled.

Many operations have refined methods for improving downstream water quality, but turbidity standards imposed by the Alaska Department of Environmental Conservation, in conjunction with the state's refusal to allow a mixing-zone policy, mean violations and enforcement conflicts will continue. Standards are unrealistic, miners say, and enforcement is inconsistent.

One example of zealous Environmental Protection Agency activities surfaced last spring. Based on the results of a study conducted in Taiwan that implicated arsenic as a carcinogen, EPA proposed that acceptable levels of arsenic in discharged water be revised from 50 parts per billion to 18 parts per trillion.

According to Swainbank, the difference is between one teaspoon of arsenic in a railroad tank car of water and slightly more than one teaspoon in 3,000 tank cars. Such a drastic change in the standard could put some smaller miners out of business, he says.

The proposed standard met opposition from the state Department of Environmental Conservation, however. To date, the standard has not changed.

In another uphill battle, small-mine operators continue to fight for the right to mine gold in Denali National Park, specifically in the Kantishna Hills. The area, at one time an active mining district, became part of the park in 1980, when the Alaska Lands Act extended the park's boundaries.

Mining ceased after 1985, when the Sierra Club sued to prohibit the practice, charging that the National Park Service was approving permits without doing adequate studies. The mining ban was lifted in 1991, although miners with claims continue to find that obtaining a permit is difficult and fraught with controversy.

This summer the Alaska Department of Natural Resources issued placer mining permits to three miners with claims along Moose Creek near Wonder Lake. The approval's validity may hinge on a long-disputed interpretation of the Alaska Statehood Act, in which Alaska argues that navigable waterways fall under state, not federal, jurisdiction.

Disagreement continues over what qualifies as "navigable," and therefore, what parts of the park if any should be under state control. Within weeks after DNR issued the permits, Gov. Walter Hickel ordered that no new state mining claims be issued in the park, saying "it is contrary to the public interest" to do so.

The governor's order does not void any of the more than 20 claims already filed along Moose Creek, though, and the administration has said it has no immediate plans to halt operations already approved.

Environmental groups dispute the state's interpretation of the statehood act. They argue that the new permits are an example of the administration flexing its muscle to override federal laws enacted to protect lands, to spite federal control and to push for development.

Congress has appropriated more than $9 million to buy up claims already staked in the park. Over the summer, $2.3 million was spent on 17 parcels. More than 350 others must be considered.

Mining is a high-risk business affected by market prices, government intervention and geologic abnormalities. "One cause for miners to go belly-up is they just don't know what they're dealing with up ahead," says Swainbank. "You have to have a feeling for what the market is going to be. You have to assume a few things."

Certainty is impossible, however. Published predictions about the price of gold tell the story. "The one thing I found in going through (predictions) is they are invariably wrong," Swainbank says.

Regulation and expenses of compliance have made going for the gold an increasingly tough prospect. "It's certainly becoming more difficult," adds Swainbank, who has worked as a consultant to small miners years. "The general impression I have (as a consultant) is that many are working on small margins, anyway."
COPYRIGHT 1992 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Special Section: Slow Bore: A Tale of Obstacle Courses, Bright Prospects & High Hopes; Alaska's mining industry
Author:Martin, Ingrid
Publication:Alaska Business Monthly
Article Type:Cover Story
Date:Sep 1, 1992
Previous Article:Poised for growth.
Next Article:Great expectations still spur panhandle miners.

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