Feb2008

R E V I E WRESOURCE

A PERIODIC PUBLICATION OF THE RESOURCE DEVELOPMENT COUNCIL FOR ALASKA, INC. www.akrdc.org

This Edition Sponsored By:

Past issues of the Resource Review (1978-2007) are available at www.akrdc.org/newsletters/

TThe so-called clean water measuresthat could be on the statewide ballot thisfall are “dangerous and deceptive initia-tives” that Alaskans cannot afford, ac-cording to a key executive with a majorAlaska Native corporation.

Speaking before a packed RDC break-fast meeting in Anchorage last month,Rosie Barr, Resources Manager forNANA Regional Corporation, spokeout strongly against the initiatives whilepointing to the many economic benefitsmining has brought to NorthwestAlaska.

Barr believes her corporation’s experi-ence in developing the world’s largestzinc producer on its land in NorthwestAlaska is a prime example of how a reju-venated mining industry can become acornerstone of the Alaska economywhile coexisting with the environmentand the local subsistence lifestyle.

The Red Dog Mine has provided aneconomic foundation to the Northwest

Arctic Borough that supports jobs and alocal government revenue stream that en-ables residents in the region to becomemore self-reliant, Barr said. The mine hasinjected a half billion dollars into theNANA region.

When Congress au-thorized the state andNative corporationsto make land selec-tions, many of the decisions were basedon natural resourcepotential, Barr ex-plained. That was notnecessarily the casefor NANA, whichmade the majority of its land selectionsbased on subsistence use patterns andcore village areas.

At the time the Alaska Native ClaimsSettlement Act was passed, several min-eral resource areas were known to existin the region, an area roughly the size of

Indiana and home to 6,500 residents. In1980, NANA chose a 120-square-mileparcel, which included the Red Dog de-posit because NANA leaders saw RedDog as a means of developing a sustain-able economy within the region.

A number of meetings were held andshareholders recognized the need for acash economy because of the increasedcost of living in a modern society. “Ourshareholders also wanted to ensure that

Red Dog: Benefits to Alaska 1,4-6

Merchants Oppose Pebble 3

Record Chukchi Sea Lease Sale 7-8

Young Takes Colleague To Task 7-8

More Closures For Tongass 9

Action Needed On Fiscal Plan 10

RDC News Digest 11

(Continued to page 4)

I N S I D E

Red DogBenefits To Alaska From The Ground Up

MINING SHUTDOWN

INITIATIVES THREATEN

ALASKA’S MINING

INDUSTRY, A

CORNERSTONE

OF ALASKA’S

ECONOMY

Rosie Barr

The Resource Review is the official periodic publica-

tion of the Resource Development Council (RDC),

Alaska's largest privately funded nonprofit economic

development organization working to develop

Alaska's natural resources in a responsible manner

and to create a broad-based, diversified economy

while protecting and enhancing the environment.

Resource Development Council121 W. Fireweed, Suite 250Anchorage, AK 99503Phone: (907) 276-0700Fax: (907) 276-3887E-mail: resources@akrdc.orgWebsite: www.akrdc.org

Material in this publication may bereprinted without permission providedappropriate credit is given. Writer & Editor Carl Portman

Executive Committee OfficersPresident John ShivelySr. Vice President Rick RogersVice President Wendy LindskoogSecretary Scott ThorsonTreasurer Stephanie MadsenStaffExecutive Director Jason BruneDeputy Director Carl PortmanMembership Director/ Deantha CrockettProjects CoordinatorProjects Coordinator/ Marleanna SotoAMEREF Development Director

Page 2 February 2008 Resource Review www.akrdc.org

JJAASSOONN BBRRUUNNEE

(907) 276-0700 February 2008 Resource Review Page 3

OUTDOOR MERCHANTS STAND AGAINST PERMITTING

PROCESS FOR PEBBLE PROJECT -- WHAT’S NEXT?An ad opposing the Pebble Project recently ran in many

newspapers throughout the state. The ad was sponsored bythe Renewable Resources Coalition, the same group thatspearheaded the so called “clean water initiative” which, ifpassed, would mean an end to mining in Alaska.

The ad highlighted logos from many national fish tackle,equipment, and clothing companies, all who have signed onin opposition to Pebble. Some of these companies whosigned on include L.L. Bean, Orvis, Patagonia, G. Loomis,Sage, Oakley, and close to onehundred others.

The ad got me thinking. Iwonder why they would be will-ing to endorse such an ad whenthe very same companies rely onthe products a mine such asPebble would produce. Minedmaterials are vital to the produc-tion of fishing hooks, waders,sunglasses, boats, and basicallyeverything else these companiessell.

Where do they expect to getthe raw materials to make theirproducts? Here or in thirdworld nations? If we choose thelatter, high paying jobs will leave Alaska and fewer peoplewill be able to afford to buy products from these companies.If we truly are thinking globally, these companies should con-sider the consequences of third world natural resource devel-opment where environmental oversight lags compared withAlaska.

If these companies are expressing their opposition toPebble, what’s to stop them from opposing oil and gas leasingin Bristol Bay, minimal logging in the Tongass NationalForest, or any other responsible resource development proj-ect in Alaska?

Nobody wants to protect Alaska more than Alaskans.However, there is an inherent naiveté amongst lower 48ers.Our permitting process is second to none and with GovernorPalin’s recent transfer of the Habitat Division back to the

Department of Fish and Game, many of the fears that mayhave existed should be relieved.

These companies clearly feel they need to protect Alaskansfrom themselves. Unfortunately, they apparently don’t careabout the ramifications to Alaskans of shutting down all ofour economic opportunities. They don’t believe mining andprotecting fish habitat can occur simultaneously. The exam-ple highlighted in this newsletter about NANA and the RedDog mine proves we can, and do, do it right here in Alaska.

To date, there has not been anyformal mine proposed. However,the land where Pebble is located isstate land, designated for mining instate land use planning documents.The companies involved have spenthundreds of millions of dollars inexploration.

If and when it does move forward,the National Environmental PolicyAct and the state permitting processwill kick in and assure that the onlyway a mine can move forward is if itcan protect the existing subsistence,sport, and commercial fisheries re-sources.

RDC firmly believes that compa-nies such as the Pebble Partnership should be given the op-portunity to apply for their permits and prove they canresponsibly develop our natural resources. If they can’t showthey can live up to the intense scrutiny of the permittingprocess, the project will not move forward. However, sup-port for this process is imperative to Pebble, and indeed allfuture opportunities in this state.

All in all, the RDC membership and Alaskans in general,spend millions of dollars with these companies each year en-joying the outdoors. RDC members purchase expensive fish-ing rods, reels, and vests, top of the line tackle and flies, rifles,sunglasses, boats, trips, and other items from these compa-nies. If these companies are opposing our rights to respon-sibly make a living, I think we should seriously consider whowe are doing business with as well.

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“If these companies are expressing their opposition toPebble, what’s to stop them fromopposing oil and gas leasing inBristol Bay, minimal logging inthe Tongass National Forest, orany other responsible resource development project in Alaska?”

COMPANIES OPPOSING THE PROCESS FOR THE PEBBLE PARTNERSHIPAbel Quality ProductsAEG MediaAirflo FlylinesAlbrightAmerican Angler MagazineAmerican Fly Fishing TradeAssociationBoss TinBruerBruntonCarbon Flybox Co.CastawayChota Outdoor GearClackacraft Drift BoatsClear CreekCloud VeilCNDSPEY USACortlandCosta Del Mar

Dan BaileyDiamondbackDr. Slick CoEchoEx OfficioFetha StyxFilsonFishing with CliffFishpondFly Tyer MagazineFly Water Travel LLCFrontiers FS MediaG. LoomisGalvan Fly ReelsGamakatsuGammaGreat Waters Fly Fishing ExpoGreys

GuidelineHardy Alnwick EnglandHat Tail HeadwearHatch HMHIslander ReelsIzaak Walton League

Jim Teeny IncorporatedKaenon EyewearKorkersL.L. BeanLamiglas

Loon OutdoorsLOOP Fly Tackle & AdventuresMarch Brown LimitedMustadNautilus Oakley EyewearOrvis

Outcast Sporting GearPartridgePatagoniaR.L. Winston Rod Co.REC Components

RedingtonRenzettiRioRisingRO Drift BoatsSageSaltwater Fly Fishing MagazineScientific AnglersScierraScott Fly Rods7 DaysShallow Water Fishing ExpoSimmsSmith OpticsSnowbeeSouthwest Fly FishingSpirit River Inc.St. CroixStream Works

TFO Fly rodsThe DrakeThe Fly Fishing ShowThe Fly ShopThe Waterworks LamsonThomas & ThomasTibor ReelsTrout UnlimitedTurneffe Flats Umpqua Feather MerchantsVan StaalVosseler Pro Fly FishingWapsi Fly, Inc.William JosephWind River GesrYellow Dog FlyfishingAdventures

“If these companies are opposing ourrights to responsibly make a living, I thinkwe should seriously consider who we aredoing business with as well.”

Page 4 February 2008 Resource Review www.akrdc.org

our land and subsistence resources wereprotected as they are so critical to ourcultural well being,” Barr said.

In 1980, NANA’s 4,400 shareholdersapproved mining and Congress gave thegreen light to the land selections at RedDog.

“For the Inupiaq people ofNorthwest Alaska, it was a defining mo-ment that has brought so many positivebenefits to our corner of the state,” Barrsaid. She noted there are 11 villages inthe region and 90 percent of the inhabi-tants are Inupiaq, many of which relyon a traditional subsistence lifestyle.

“Our shareholders are not strangerswho merely hold paper stock certifi-cates; they are our friends, our neigh-bors and our relatives,” Barr said. “Ourvalues are evident in the many projectswe undertake, such as the preservationof our culture and language.”

Barr pointed out mining has resultedin stronger local economies in ruralAlaska, more self-reliant communities,educational resources and opportuni-ties, and good jobs that allow residentsto stay in villages and continue theirsubsistence way of life.

In 1982, NANA entered into anagreement with Cominco (nowTeckCominco) to finance, construct andoperate Red Dog, 90 miles northeast ofKotzebue and 52 miles east of its porton the Chukchi Sea.

“Overall, the goal of the agreement is

to create lasting, skilled jobs for NANAshareholders, provide opportunities forNANA’s youth, and act as a catalyst forregional economic benefit without in-fringing upon the Inupiat culture andsubsistence way of life,” Barr said. Theagreement also called for the formationof a subsistence committee comprised oflocal hunters from the communities ofKivalina and Noatak. This committeeprovides valuable insight to the RedDog Management Committee, whichoversees the operations at the Red Dog

Mine and consistsof members repre-senting NANAand TeckCominco.

“It’s a good thingthat NANA andTeckCominco hada long-term invest-ment horizon,”Barr said. She ex-plained that RedDog began with a$300 million capitalinvestment, whichgrew over the yearsby another half a

billion dollars. With interest, theamount grew to over $1 billion dollars.The sum of capital and operating profitsand losses only turned positive in 2005 –15 years after start-up.

“With today’s high commodity prices,it now looks like we made a brilliant in-vestment, but Red Dog suffered years ofenormous losses,” Barr said.

Even during those record losses,TeckCominco paid annual royalties tothe NANA region. NANA has receivedtotal royalties of approximately $170million since the mine began operation.Total payments to the NANA region,including payments to the NorthwestArctic Borough, shareholder salaries,NANA royalties and NANA contractsat the mine has been about a half billiondollars since start-up in 1989.

The Northwest Arctic Borough hascollected $64 million in payments fromthe mine in lieu of taxes through 2006.The estimated payment for 2007 is $10.8million. Red Dog is the sole taxpayerfor the region as no property taxes arepaid by any homeowner in the borough.Because of Red Dog, the borough is ableto issue bonds to build new schools.

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(Continued from page 1)

Two mining shutdown initiatives have been introduced by an anti-mining coalition and may appear on thestatewide ballot this fall. Under the guise of ‘clean water’ petitions, these initiatives would devastate theeconomy of large parts of Alaska by shutting down existing and future mining operations.

RED DOG MINE IS CORNERSTONE OF NORTHWEST ALASKA ECONOMY, NANA DEFENDS RECORD

(907) 276-0700 February 2008 Resource Review Page 5

The latest school under construction isin Noatak, where the existing schoolwas at 250 percent over capacity.

Today, the mine provides 60 percentof the borough’s budget. Since the be-ginning of production, the mine hashired over 1,100 NANA shareholdersand has paid out over $223 million insalaries to shareholders.

NANA’s royalty has a far-reachingimpact across Alaska. Under the termsof the Native claims settlement act, 62percent is distributed to the otherNative village and regional corpora-tions. Of the approximately $58.1 million NANA received this year,nearly $36 million will be distributed toother land-based regional corporations,which will in turn redistribute 50 per-cent of the amount they receive to theirvillage corporations.

Up until now, NANA royalty pay-ments have been based on 4.5 percent ofthe net smelter value of the oreprocessed at the mine. However, thecash flow at the mine entered a new erain the 3rd quarter of 2007 when NANAbegan receiving 25 percent of the netproceeds from the mine. The royaltywill increase by 5 percent with each five-year period to a maximum of 50 percent.

Based on current lead and zinc prices,NANA is estimating it may potentiallyreceive over $6.5 billion in net proceedspayments over the projected life of RedDog, currently out to 2031. Of that

amount, over $4 billion will be paid outto other regional corporations.However, these revenues are at risk ifthe initiatives are approved by voters inthe fall.

In a recent letter to Native corpora-tion presidents, NANA President MarieGreene warned that if the proposedwater initiatives become law, operationsat Red Dog, as well as future develop-ments to extend the mine’s life beyond2012, face a very uncertain future.

“The initiative proponents argue thatexisting mines that already have all nec-essary permits, somehow would not beimpacted,” Greene said. “However, theinitiatives themselves fail to acknowl-edge that every mine constantly requiresupdates and modifications to permitsover the life of the development.”

Greene warned that if the initiativesbecome law and Red Dog cannot securenew permits to continue operations, the$6.5 billion in royalties will “never ma-terialize.” She said, “the initiatives ab-solutely put in jeopardy our ability toresponsibly develop our natural resources.”

The land surrounding Red Dog is richin metals which results in naturally oc-curring Acid Rock Drainage (ARD).This results in rust colored staining ofstreams and rocks which is actually how

the deposit was discovered. Baselinestudies conducted in the 1980s prior tothe mine’s development indicated thesepre-existing water quality issues. Thewater quality upstream of the mine wasand still remains highly degraded.

Prior to the mine’s development, Barrexplained that frequent fish kills wererecorded in waters downstream fromthe Red Dog deposit. Since develop-ment, the water quality has significantlyimproved, which resulted in fish extend-ing their reach up into Red Dog Creek,which was previously devoid of aquaticlife. In fact, a fish weir had to be in-stalled immediately downstream of themine’s discharge site to prevent fishfrom swimming upstream.

“It is critical to note that the water issafe to drink,” Barr said in reference toNANA’s commitment to preservingsubsistence resources. “The animals,fish and berries are safe to eat.Numerous studies are conducted to en-sure this. Red Dog mine could not oper-ate if this weren’t true. While NANA ischarged with working towards eco-nomic development and sustainabilityfor our people, we continue to place thehighest priority on protecting oursubsistence culture.”

Barr also noted Red Dog is one of thefew mines operating in America that hasachieved ISO 14001 Certification. Thecertification is an international standardthat defines the overall structure and

Arctic Slope

NANA

Bering Straits

Calista

Bristol Bay

Aleut

Koniag

Cook Inlet

Chugach

Ahtna

Sealaska

Doyon

In the projected lifetime of the Red Dog Mine, $6.5 billion will be distributed to NANA in royalty payments. Of that, $6.5 –4 billion will be shared with the 12 other Native corporations.

NANA

NANA SHARES RED DOG PROFITS WITH ALL OF ALASKA

In the projected lifetime of the Red Dog Mine, $6.5 billionwill be distributed to NANA in royalty payments. Of that, $4 billion will be shared with the 12 other Native corporations throughout Alaska.

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Page 6 February 2008 Resource Review www.akrdc.org

requirements of an environmental man-agement system. The standard is basedon compliance with regulations, preven-tion of pollution and continual improvement.

Barr bristles at the backers of the ini-tiatives who claim they are about ‘cleanwater.’ She noted the initiatives set thebar at a level that cannot be reached,making it impossible for a large mine tobe developed or to operate in Alaska.

The initiatives prohibit any large scalemetallic mining operation that exceeds640 acres, including roads, ports, fuelstorage facilities and other infrastruc-ture. Red Dog covers over 1,800 acres.

Barr noted the initiatives would pro-hibit the release of water containing anyamount of metals or chemicals, even ifthe water is cleaner than tap water andmeets stringent state water quality stan-dards.

“What’s the bottom line with theseinitiatives?” Barr asked. “An end tomining as we know it. They would shutdown existing mines when they applyfor new permits, which they do on a

regular basis, and prohibit futuremines,” Barr said. “The initiative’s lan-guage prohibits the operation of a metalmine if it creates waste rock or tailings.That’s an impossible standard. It pro-hibits any water discharge – even if

those discharges meet the state’s alreadystringent standards,” Barr continued.

“These initiatives will rob communi-ties, Alaskans and local governments ofsignificant sources of revenues,” Barradded.

Over the long term, the AlaskaDepartment of Natural Resources esti-mates the initiatives could result in a lossof over $10 billion in revenues to thestate. In addition, local governments,which currently collect over $14 milliona year from mining, would lose a criticaltax base. The estimate is based on im-pacts the initiatives could have on exist-ing mines in operation today acrossAlaska and do not include revenuestreams from potential future mines.

“We also lose billions more in addi-tional revenue to Alaskan businessesthat support the mining industry,” Barrsaid, as well as over 3,000 jobs for min-ing employees and their families. “Thereare hundreds of Alaskans attendingtrade schools or colleges with the ulti-mate goal of gainful employment at oneof the existing mines in Alaska today,”Barr said.

“These are initiatives that Alaska can-not afford.” Barr concluded.

“THESE ARE INITIATIVES THAT ALASKA CANNOT AFFORD,” NANA WARNS

Mines across Alaska could be impacted by the ini-tiatives. Pictured above is the Ft. Knox mine, a majorgenerator of tax revenue and jobs to Fairbanks .

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A new statewide coalition of Alaskans concerned aboutthe negative effects on Alaska of two proposed ballot initia-tives was announced last month.

Alaskans Against the Mining Shutdown will direct astatewide campaign to defeat two statewide ballot initiativeswhich could have the effect of shutting down existing minesand prohibiting future mines in Alaska. The campaign noti-fied the Alaska Public Offices Commission of its intentionto register as a ballot measure group should these measuresbe certified for the ballot by Lt. Governor Sean Parnell.

"The end result of the ballot initiatives would be a shut-down in jobs, a shutdown of a rapidly growing sector ofAlaska's economy and, for many communities, a shutdownof hope. These initiatives would have a devastating effect onAlaska’s mining families, and be a serious economic blow torural communities and the economy statewide," said MarieGreene of Kotzebue, a founding member of the campaigncommittee and president of NANA Regional Corporation.

Other founding members of the campaign committee

include RDC President John Shively of Anchorage, KristanCole of Wasilla, Bill Corbus of Juneau, Hugh Fate ofFairbanks, Robert Favretto of Kenai, Cheryl Frasca ofAnchorage, Ernie Hall of Anchorage, Marc Langland ofAnchorage, Matthew Nicolai of Anchorage, Vicki Otte ofAnchorage, Mark Pfeffer of Anchorage, Ramona Reeves ofFairbanks, John Sandor of Juneau, Helvi Sandvik ofAnchorage, William Sheffield of Anchorage, Rick Solie ofFairbanks, Arliss Sturgulewski of Anchorage, Dan Sullivanof Anchorage, Jim Taro of Ketchikan, Tim Towarak ofNome, Mead Treadwell of Anchorage, Jim Whitaker ofFairbanks, Bill Williams of Ketchikan, and Mayor JohnWilliams of Kenai Peninsula Borough.

Willis Lyford, an Anchorage marketing and public affairsexecutive, will serve as the campaign's director headquar-tered in Anchorage, and Timothy Sullivan, Jr. of Anchorage,a longtime Alaska government affairs consultant, will serveas campaign field director. Editor’s Note: To learn more, please visit www.againsttheshutdown.com

ALASKANS UNITE TO STOP SHUTDOWN OF MINING

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(907) 276-0700 February 2008 Resource Review Page 7

The U.S. Minerals ManagementService’s February 6 lease sale in theChukchi Sea attracted a record 667 bidsand nearly $2.7 billion in winning bids,making it the most successful sale inAlaska to date. This was the third leasesale to occur in the Chukchi, with theclosest tract 54 miles from land.

“We are very pleased with the sale’shistoric results,” said MMS DirectorRandall Luthi, in remarks delivered be-fore the Resource DevelopmentCouncil’s Anchorage breakfast forumthe morning after the record event. “Oiland gas resources present in the ChukchiSea are vital to our nation’s and Alaska’seconomy.”

Luthi noted the lease sale comes at acritical time when the nation’s demandfor energy is increasing. “We can eitherclose the gap with domestic production,or increase our reliance on foreignsources,” Luthi said. “This sale repre-sents an opportunity to lessen the gap.”

Over the past 30 years, MMS hasfunded nearly $300 million for environ-mental studies in Alaska waters andsince 2000, the agency has conducted 30to 40 studies each year offshore Alaska.

“We are committed to ensuring that allenvironmental concerns have been ad-dressed while we move forward to supply energy to our nation,”Luthi said.

Companies submitted bids totaling al-most $3.4 billion, with high bids of morethan $2.6 billion. The highest bid re-ceived for the sale was $105,304,581 sub-mitted by Shell. Other companiesparticipating in the sale includedConocoPhillips, Repsol E&P USA, Inc.,Statoil Hydro, Eni Petroleum, IonaEnergy and North American CivilRecovery.

“We know that the Chukchi Sea isvery important to the people who livealong its coast and use its resources,”Luthi said. “MMS will continue work-ing closely with the State of Alaska, localcommunities, whalers and industry tohelp minimize any impacts of industryactivity on subsistence hunting. In fact,leases issued from the sale will includestipulations for protection of biologicalresources, including marine mammalsand migratory and other protected birds,and methods to minimize interferencewith subsistence hunting and other sub-sistence harvesting activities.”

A decision on whether to list the polar bear on the Endangered Species Act is expected this month. A listingis likely to result in activists challenging future oil and gas development in northern Alaska.

CHUKCHI SEA LEASE SALE

SETS RECORD, ACTIVISTS

CITE POLAR BEAR LISTING

Editor’s Note: Below is a condensed version of aletter from Congressman Don Young to Rep.Edward Markey (D-MA) regarding a bill thatwould have delayed the February lease sale inthe Chukchi Sea.

I am disappointed that you havechosen to introduce H.R. 5058, whichseeks to postpone Lease Sale 193 inthe Outer Continental Shelf in federalwaters off Alaska. If, in combinationwith your decades-long opposition toANWR, it succeeds in stopping U.S.production of energy, I am afraid thatthe people of Massachusetts will con-tinue to suffer from an economy bat-tered by higher energy prices and ourincreasing dependence on unreliableforeign sources for energy. At a timewhen all Americans are suffering fromhigher energy prices and the havocthose prices are having on the U.S.economy, I wanted to share with youthe importance of Alaska’s resourcesto the people of the nation.

OCS Lease Sale 193 is estimated tocontain 15 billion barrels of oil and 77trillion cubic feet of natural gas, for acombined total of 27.8 billion barrelsof oil equivalent. ANWR is estimatedto hold another 10.4 billion barrels ofoil, for a total of 38.2 billion barrels ofoil. This would almost double thetotal United States proven reserves ofoil. And at today’s oil and gas prices,Lease Sale 193 and ANWR representnearly $3 trillion to the U.S. economy,if we choose to develop them. Failureto access these energy supplies repre-sents another $3 trillion thatAmericans will spend to buy foreignoil, because our economy will requireat least that much oil until we switchto alternatives.

The choice for Americans is simple:do we want to send $3 trillion to for-eigners, or get off our duffs and useour own energy and keep the money

YOUNG TAKES

COLLEAGUE TO

TASK OVER LEASE

SALE OPPOSITION

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Page 8 February 2008 Resource Review www.akrdc.org

here at home? For the people of Massachusetts, the

result of producing the energy that theyown in Alaska is profound, especially ata time when many households in yourstate have been devastated by heating oilcosts. I know that our former colleagueJoe Kennedy has been working withHugo Chavez’s government inVenezuela to provide 45 million gallonsof heating oil to poor households inAmerica. ANWR and Lease Sale 193contains 36,000 times as much energy asCitgo, Hugo Chavez and our formercolleague are providing for the poor anddisplaced in America. The production ofthat energy here would also producehundreds of billions of dollars in taxes,royalties and added benefits to helpgrow our own economy, instead ofeconomies of foreign governments.

The people of Massachusetts used justunder 137 million barrels of oil in 2005to get around, heat their homes, gener-ate electricity and make things. The en-ergy in Alaska you oppose would fill allof the needs of the people of your statefor 279 years, and create hundreds ofthousands of American jobs and billionsof dollars in royalties and taxes – instead of being replaced by foreign oiland foreign jobs. Surely you can under-stand – at a time like this when oureconomy is stumbling and our peopleare suffering from the high cost of energy – why I think it is important thatwe begin to work together to bringAmerica’s energy supplies online to help Americans.

What I findmost interestingis that your pro-posal to lock-upvast amounts ofAmerican energycoincides withthe so-called“economic stim-ulus” proposals,all of which arenothing more than band-aid fixes thatignore the root of the problem. Trueeconomic stimulus, as our competitorsaround the globe have shown us, is hav-ing abundant, affordable, and reliablesupplies of energy to inject into an ailingeconomy.

That is why I have had a hard time un-derstanding why you would introducelegislation that would deliberately with-hold domestic supplies of American energy from those Americans to whomthey belong so that we can continue tobuy more foreign oil, send moreAmerican dollars to foreign govern-ments, and pay even higher energycosts.

Some have ridiculed President Bushfor asking the Middle Eastern countriesto produce more oil on his recent trip,suggesting that he was “begging for oil.”I wonder why he didn’t just stay athome and ask Congress to stop makingit illegal to produce energy in the UnitedStates, and forego begging foreigners fortheir oil.

– Congressman Don Young

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“What I find most interesting is that your proposal tolock-up vast amounts of American energy coincides withthe so-called ‘economic stimulus’ proposals, all of whichare nothing more than band-aid fixes that ignore theroot of the problem. True economic stimulus, as our competitors around the globe have shown us, is havingabundant, affordable, and reliable supplies of energy toinject into an ailing economy.”– Congressman Don Young

The sale was not without controversyas environmentalists filed suit in federalcourt earlier this month to stop it. Theyargue that oil and gas exploration anddevelopment should not occur in polarbear habitat.

In a sign of things to come if the polarbear is listed under the EndangeredSpecies Act (ESA), opponents protestedthe lease sale and turned out in force ata recent U.S. House Committee hearingon global warming, which called on theInterior Department to halt the sale.The hearing drew a standing-room-onlycrowd with some spectators dressed upin fuzzy polar bear costumes holdingsigns reading, “Oil greed destroying theworld,” and “Don’t drill in my home.”

Rep. Edward Markey (D-MA) filedlegislation in an unsuccessful attempt toforce the agency to hold off on the sale.

The agency estimates the Chukchi Seaholds 15 billion barrels of oil and asmuch as 77 trillion cubic feet of naturalgas. The Beaufort Sea and the NationalPetroleum Reserve-Alaska could holdup to another 125 trillion cubic feet ofgas, but environmentalists are likely topush for critical habitat designations inthe most highly-prospective areasshould an ESA listing of polar bearsoccur.

RDC is concerned that a listing ofpolar bears and its subsequent third-party lawsuits would jeopardize a gasline from the North Slope to the Lower48. New natural gas discoveries beyondthe Slope’s 35 trillion cubic feet ofknown reserves are vital to the gas line’seconomic viability. Known reserves arenot enough to make the project economic.

The polar bears are well managed byinternational and domestic agreements,laws and regulations, making them oneof the most protected species in theworld. Their worldwide population hasdoubled in 40 years, and in Alaska thepopulation is healthy in size and distribution.

POLAR BEAR

ACTIVISTS TARGET

LEASE SALE

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(Continued from page 7)

Congressman Don Young

(907) 276-0700 February 2008 Resource Review Page 9

The U.S. Forest Service released a revised management planfor the Tongass National Forest, leaving only 3.4 million acresof the 17-million acre unit open to development and somelogging.

The revised plan would keep the potential maximum annualharvest the same at 267 million board feet, although theagency concedes the harvest is unlikely to exceed 100 millionboard feet annually for the next several years.

With the volume of timber under contract at an all-time low,last year only 20 million board feet was logged. The installedmanufacturing capacity in the region is about 370 millionboard feet and the normal operating capacity for the currently-operating mills is about 200 million board feet annually.

The new plan removes several areas from the timber basethat had been identified as wildlife corridors. The plan adds90,000 acres to old-growth reserves and protects an additional47,000 acres considered most vulnerable to development.

While the plan leaves 2.4 million acres in backcountry areasopen to logging, only about 663,000 acres would actually bescheduled for harvesting over the next 100 years, and half ofthat acreage is second-growth timber cut decades ago.

Overall, 10 million acres of the Tongass is forested and 5.5million acres is considered commercial timberland. Since 1907,only a little over 400,000 acres have been logged. Under thenew plan, only 6.5 percent of commercial-grade old-growthacreage will be harvested between now and 2108.

The Tongass plan was originally adopted in 1980 and hasbeen amended many times since then. With each revision, thetimber base available to a fledgling forest products industryhas diminished. Prior to 1990, 450 million board feet of tim-ber was typically harvested from the forest on an annual basis.

In comments submitted to the Forest Service last spring,RDC and the Alaska Forest Association said that the ForestService, through its management plan revision for the Tongass,could help build a more diverse and vibrant economy inSoutheast Alaska by allocating a sustainable and sufficientlong-term supply of economic timber. Such action would re-store a fully integrated forest products industry in the region,the groups noted.

But in order for a fully integrated industry to take root, theagency would need to strike a true balance among multipleuses in a forest that is mandated to be managed under the mul-tiple use principle, as opposed to the more restrictive uses of anational park.

Did the Forest Service strike a fair balance in its latest planrevision? Initial feedback from industry indicates the agencyfell short.

“Although the Alaska Forest Association has not yet seenthe final EIS for this plan, given all the efforts the agency hasmade to maintain the conservation strategy that was devel-oped for the 1997 plan and the lack of recognition of the dev-astating effects that plan has had on the timber industry; it ishard to imagine how this amended plan can provide adequateeconomic timber for an integrated timber manufacturing in-dustry,” said George Woodbury, President of the association.

The plan takes effect 30 days after it is published in theFederal Register, which is expected by mid-February. Groupshave 90 days to legally challenge the plan.

FOREST SERVICE

CLOSES MORE OF

THE TONGASS

NATIONAL FOREST

TO LOGGING

The timber industry in Southeast Alaska today is a mere shadow of itself. Withmost of the Tongass now off-limits to logging, the forest products industry and itssupport sectors have lost over 4,600 jobs since the 1990s, following the closureof the region’s two major pulp mills and numerous sawmills. The annual payrolllost since 1990 is over $100 million.

Page 10 February 2008 Resource Review www.akrdc.org

For many years, business leaders in Alaska and the organi-zations they belong to, such as RDC, have been imploring ourstate government to develop a fiscal plan.

However, the response to these pleas has been very disap-pointing. It is true that we occasionally hear political leaderstalk about pieces of a plan. The current plethora of approaches to saving surplus funds from the new oil taxes isan example of the piecemeal approach we have seen in thepast.

Alaska is at an interesting crossroads with regard to fiscalplanning. Our government has chosen to increase taxes at atime when we already have a surplus, which puts us in the en-viable position (unless, of course, you are one of the state’sthree major taxpayers) of being able to discuss how these sur-plus funds might affect our fiscal future. Thus, it would seemto be the perfect time for our leaders to construct a fiscal plan.

So, how might a plan be constructed? The first step in anyfiscal plan is to look at the expense side of the equation. Thisstep would require using a base year to start from and then es-timating future expenses based on some formula driven by as-sumptions including inflation and population growth. Iwould propose that such a plan cover at least a ten-year periodand be updated no less frequently than every other year.

Using 2006 as the base year for the operating budget, andlimiting future budgets to three percent growth per yearmight be a place to start. It is true that such a formula wouldmean that the 2008 proposed operating budget is $600 millionover the target, but the same formula was adopted by the leg-islature in the recent special session raising production taxes.

The point here has less to do with what the formula is thanthat the state needs to have some long-term spending goals sowe can stop the piecemeal approach to budgeting, which hasbecome a major detriment to fiscal discipline.

The legislature could also consider adopting a two-yearbudget cycle. I believe there will be several positive effectsfrom such a policy. These include reducing the temptation toincrease the operating budget each year, helping the legislaturemeet the voter mandated 90-day session, and reducing thetime that executive branch agencies have to spend on thebudgeting process, thus freeing them to carry out their otherresponsibilities.

Similar long-term goals need to be set for the capital budget.However, the annual increases to the operating budget posethe biggest threat to long-term fiscal stability.

Any fiscal plan must have a policy for saving surpluses, andthere are several options for doing so. One would be to payback the debt owed to the Constitutional Budget ReserveFund that has resulted from previous withdrawals from thatfund. A solid fiscal plan would also set a target for how largewe want this fund to grow.

Another place to save the surplus is in the Permanent Fund.However, before making future deposits to this fund, I believethe legislature should adopt the Percent of Market Value

approach for distributions from this fund, either by statute orby amending the constitution. Such an approach would keepthe dividend program, but also set aside some of the distribu-tion to be returned to the Earnings Reserve portion of thePermanent Fund in times of surplus, but be available for meet-ing budget deficits in less robust times.

The split between these twostreams of revenue will prob-ably be the subject of a gooddeal of public debate, but a50/50 split seems reasonableto me. There are also somethat would put a cap on thedividend, and that is certainlya subject that could be dis-cussed as part of any long-term fiscal plan.

Once these savings deci-sions have been made, thestate should be able to esti-mate probable revenue steamsfor the ten-year period. Sucha plan would give us the basis for some comfort as to how thestate will address those years in the future when deficits willsurely be the order of the day, even if it would lead us to having discuss the possibility of a statewide tax.

Certain items will drive any discussion of a fiscal plan.These include the funding of education, local government rev-enue sharing, and the debt to the state’s retirement funds,among others. In addition, the steady decline in oil produc-tion will play a dominant role in any 10-year fiscal projection.

A fiscal plan should drive fiscal discipline, particularly if thelegislature were to adopt the base budget assumptions I pre-sented above. However, as much as political leaders talkabout holding the line on and/or reducing the cost of govern-ment, they have not done so. If government is ever to get serious about cutting expenses, then it must realize the onlyway to achieve this illusive goal is to repeal laws. New lawsdrive new expenses. Getting rid of old laws and refining thetime-consuming and wasteful processes that governmentsometimes employs is a way to make a well designed fiscalplan work.

I have tried to lay out some options to get to a fiscal plan forour state. Admittedly, it is not the only road map to that des-tination. However, no matter what the route, if we do notstart this journey in a time of fiscal abundance, we will beforced into crisis planning when this abundance no longerexists.

By not acting now, the government is wasting an opportu-nity and will also inevitably waste at least some of our fiscalresources. In the words of a country western song, what weneed is, “ a little less talk and a lot more action.”

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A LITTLE LESS TALK AND A LOT MORE ACTION

“No matter whatthe route (to a fiscalplan), if we do notstart this journey in atime of fiscal abun-dance, we will beforced into crisisplanning when thisabundance no longerexists.”

(907) 276-0700 February 2008 Resource Review Page 11

RDC, CONSERVATION COMMUNITY OFFER AWARD

RDC and the Alaska Conservation Alliance have joined to-gether to establish an award to honor organizations, individu-als and/or businesses that create solutions and innovationsthat advance economic development and environmentalstewardship.

The “Tileston Award” is in honor of two long-timeAlaskans, Peg and Jules Tileston, who worked on seeminglydifferent sides of conservation and development issues butwho always agreed “that if it is in Alaska, it must be doneright.”

The award will not be viewed as a ‘green’ award for indus-try or an ‘economic’ recognition for a conservation organiza-tion. It will be uniquely Alaskan, whose recipients aredetermined by board members from each organization.

Nominations for the 2008 Tileston Award will be acceptedthrough March 31. For more information or an application,visit www.tilestonaward.com.

COMMENTS DUE ON YUKON FLATS LAND EXCHANGE

The U.S. Fish and Wildlife Service has released a DraftEnvironmental Impact Statement for the proposed YukonFlats National Wildlife Refuge Land Exchange between theagency and Doyon Limited. Beginning this month and con-tinuing into March, public hearings will be held in a numberof Interior Alaska villages, as well as Anchorage andFairbanks. Written comments are due by March 25.

Both Doyon and RDC are supporting the Proposed ActionAlternative which would require the Native corporation toturn over 150,000 acres rich in fish and game resources to theagency. Doyon would receive oil and gas rights to 200,000acres of lower-quality habitat with high oil and gas potential,but would have surface rights to less then 110,000 acres.

Significant quantities of oil and gas may exist beneath therefuge. A recent private sector report estimates recoverable re-sources of as much as 1 billion barrels of oil and 15 trillioncubic feet of natural gas. The exchange would allow bothDoyon and the agency to consolidate their holdings in therefuge. With 2 million acres, Doyon is the largest private landowner in the 11-million-acre refuge.

For details and comment points, see RDC’s Action Alert at:www.akrdc.org/alerts/2008/yukonflatslandexchange.html

GROUPS SUE TO BLOCK DEVELOPMENT IN NPR-A

Three environmental groups are suing the federal govern-ment to block oil development in Alaska’s NationalPetroleum Reserve in the name of the yellow-billed loon, abird that breeds in tundra wetlands in Alaska, Canada andRussia. The groups claim the loon is threatened by oil devel-opment in the energy reserve and that if it is to survive in awarming Arctic, its habitat should not be open to oil and gasdevelopment.

The Center for Biological Diversity is leading the effort to

list the loon under the Endangered Species Act. The samegroup has also petitioned the federal government to list thepolar bear.

MORE BELUGA WHALES IN COOK INLET

NOAA Fisheries Service biologists estimate a beluga whalepopulation of 375 in Cook Inlet, according to data collectedduring their annual survey last summer. This population esti-mate is the largest since 2001, increasing from 302 in 2006.

Cook Inlet beluga whales were listed as depleted in 2000under the Marine Mammal Protection Act. Since then, subsis-tence hunting, believed to be the main cause behind thewhale’s steep population decline in the last decade, has beencurtailed. Last year NOAA Fisheries Service proposed listingthe Cook Inlet population under the Endangered Species Act(ESA). A final determination is due this spring.

RDC, the State of Alaska and local governments have opposed an ESA listing, believing the whales are now in re-covery mode, and noting they are protected under currentlaws, regulations and agreements.

RDC ACTION ALERT: TULSEQUAH CHIEF MINE

The Alaska Coastal Management Program is seeking publiccomments on the consistency of the Tulsequah Chief MineProject proposal to use Alaskan waterways to transport mate-rials from British Columbia to Juneau. Comment deadline isFebruary 21. See RDC Action Alert: www.akrdc.org/alerts/

TRANSCANADA ADVANCES IN AGIA PROCESS

Governor Sarah Palin announced last month her adminis-tration has finished its review of the five AGIA applicationsand that TransCanada has satisfied all of the mandatory re-quirements set out in law. The company’s application is nowunder evaluation to determine whether it will merit issuanceof the exclusive AGIA license. The State is now solicitingpublic comments to help it evaluate the application and makethat determination.

The companies which had applied under AGIA to developand build a natural gas pipeline to transport North Slope gasto market were: AEnergia LLC, the Alaska Gasline PortAuthority, the Alaska Natural Gas Development Authority,Little Susitna Construction Company (Sinopec) andTransCanada.

ConocoPhillips submitted an ‘alternative’ proposal outsidethe AGIA process, but that plan was rejected. WhileTransCanada’s application was deemed complete, the admin-istration determined that the other applicants did not meet therequirements of AGIA.

Public comment will close March 6. If the Palin administra-tion determines TransCanada’s proposal merits issuance of theAGIA license, it will forward the application to theLegislature for approval.

Meanwhile, ConocoPhillips says its proposal merits consid-eration and it has taken its plan to Alaskans through a majormedia campaign. The company is seeking new discussions onthe plan with the administration.

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