Providing coverage of Alaska and Northwest Canada's mineral industry
May 2017

Vol. 22, No. 21 Week of May 21, 2017

Mining News: Pebble door opens

EPA agrees to lift pre-emptive restrictions, allowing normal permitting

Shane Lasley

Mining News

After five long years of battling inside and outside of the courtroom, Pebble Limited Partnership and the U.S. Environmental Protection Agency have negotiated an agreement that opens the door for the enormous Pebble copper-gold-molybdenum project in Southwest Alaska to enter the permitting process unencumbered by predetermined restrictions.

“This settlement represents a major step forward for the Pebble project,” said Pebble Partnership CEO Tom Collier. “It allows us to start advancing Pebble to the next phase of development and provides us with the opportunity to initiate the normal permitting process for this project.”

A sentiment reflected by EPA Administrator Scott Pruitt.

“We are committed to due process and the rule of law, and regulations that are 'regular',” said the former Oklahoma attorney general. “The agreement will not guarantee or prejudge a particular outcome, but will provide Pebble a fair process for their permit application and help steer EPA away from costly and time-consuming litigation. We are committed to listening to all voices as this process unfolds.”

While this is an important milestone for Northern Dynasty Ltd., currently the sole owner of Pebble, the outcome has implications well beyond one copper project in Alaska, or even the U.S. mining sector at large. Stopping EPA from using Section 404 (c) of the Clean Water Act to ban or restrict a project prior to permitting prevents a precedent that could have significantly expanded the environmental agency’s regulatory reach.

Time limits

While considered a major victory for the Pebble Partnership – a company that has some US$750 million invested in the exploration, environmental studies, engineering and other work need to ready the world-class copper project for permitting – the settlement with EPA involved give and take from both parties.

One of the major limitations for the Pebble Partnership is time.

Under the terms of the settlement, the hopeful mine developer has 30 months to file permit applications, which initiates the permitting process under the National Environmental Policy Act, and 48 months for a final environmental impact statement to be filed by the US Army Corps of Engineers. This time limit was included to ensure the settlement does not violate rules that would constrain the authority of a federal cabinet officer.

Pebble leaders, however, do not see the time limits as much of an impediment.

Both Collier and Northern Dynasty President and CEO Ron Thiessen told Mining News that they expect to have permit application in by the end of 2017 and have a final environmental impact statement from the U.S. Army Corps of Engineers by May, 2021.

As long as these two deadlines are met, the EPA has agreed not to take any pre-emptive CWA 404 (c) action against Pebble. If either deadline is missed, however, the regulator has the option to dust off and activate its previous decision.

Pebble has also agreed to withdraw its legal action against EPA.

Being able to take Pebble into permitting without limitations, however, was the primary reason for the legal action.

"From the outset of this unfortunate saga, we've asked for nothing more than fairness and due process under the law -- the right to propose a development plan for Pebble and have it assessed against the robust environmental regulations and rigorous permitting requirements enforced in Alaska and the United States," Thiessen said. "Today's settlement gives us precisely that, the same treatment every developer and investor in a stable, first-world country should expect."

Precedent averted

While of vital importance to the Pebble Partnership, the lifting of EPA’s CWA 404 (c) restrictions on permits to develop Pebble averted a precedent that had the potential to change the way EPA assessed project development in the United States.

In 2015, Collier informed the U.S. House Science Committee that the Pebble Partnership has uncovered documents revealing that at least part of EPA’s over-arching intent in pre-emptively stopping the Pebble Mine is to set a precedent that would allow the agency to decide where industrial development could and could not take place in the U.S.

“They want to be able to zone the watersheds of America,” Collier summarized.

EPA’s internal discussions seem to confirm this assertion.

In 2010, while tossing around the idea of taking pre-emptive 404 (c) action against Pebble, upper level EPA management said that a successful pre-emptive veto of the Pebble permits would “serve as a model of proactive watershed planning” in the United States and listed this assertion in the pro column of a matrix evaluating the potential of taking a pro-active stance at Pebble.

The settlement between the Pebble Partnership and the EPA does not preclude the environmental agency from attempting to extend its authority to pre-permitting in the future. The fact that it’s attempt to do so at Pebble was stopped short, however, prevents the precedent from being set and lessens the odds of the agency prevailing if it tried to veto a permit prior to permitting in the future.

Collier, a 40-year Washington D.C. insider who has worked alongside some of the juggernauts of the modern environmental movement, told Mining News that he believes the level of backlash EPA has received from lawmakers and others “will discourage any administration from taking this direction, forever.”

Major milestones ahead

With the settlement reached, precedent averted and clock set, the Pebble Partnership is wasting no time in achieving the next major milestones – bringing a major mining company on board and submitting a mine plan for permitting.

Since any global mining company that joins the Pebble Partnership would want to be involved in the mine design, bringing such a partner onboard tops this list of priorities.

The Pebble Partnership and Northern Dynasty CEOs see no lack of potential suitors.

“As a world-class mineral deposit, there remains significant interest in Pebble among major mining companies. This settlement removes a major stumbling block to attracting new investment in the Pebble project and in Alaska,” said Collier.

This world-class deposit hosts roughly 56.8 billion pounds copper, 70.4 million ounces gold, 3.4 billion lb molybdenum and 343.6 million oz silver in measured and indicated resource, an attractive asset in a world where new stores of copper and gold are getting harder to find.

“When it comes to undeveloped assets, Pebble is both the largest copper and largest gold resource in the world,” Thiessen explained. “This is the kind of long life asset that most major mining companies covet,” he added.

Thiessen said Northern Dynasty is currently in advanced talks with a number of mining companies and the new Pebble partner may be a consortium of three or four of them.

When asked if he anticipates that a new Pebble partner will be in place and permits will be submitted by the end of 2017, without hesitation, Collier’s answer was an emphatic “yes”.

Designing a mine

While the coming Pebble partner(s) will want to weigh in on the final design presented for permitting, Northern Dynasty has not been idle on this front.

Thiessen told Mining News that his company has been working on the potential scenarios for a Pebble Mine and it is likely that the mine to be presented for permitting will be significantly smaller than ideas that have been considered in the past.

In 2011 Northern Dynasty published a preliminary economic assessment that considered a 220,000-metric-ton-per-day operation at Pebble that would produce 31 billion lb of copper, 30 million oz of gold, 1.4 billion lb of molybdenum, 140 million oz silver, 2.6 million lb of rhenium and 907,000 oz of palladium over a 45-year mine-life.

While robust in its own right, this mine plan only accounts for about 32 percent of the overall resource found at Pebble.

Though capable of supporting a multi-generational mine of world-class proportions, the Pebble deposit comes to surface and is high enough grade to be scalable.

“Pebble has a lot of scale but, more importantly, it has a lot of optionality,” Thiessen told Mining News.

Traditionally, Pebble has been considered two deposits – Pebble West, a lower grade but comes right to the surface, making it ideal for starting a low-cost open-pit mine, and the higher grade Pebble East deposit, which would likely be mined from underground later on.

Pebble West has a higher grade core that spans some 3,000 feet across that would make the ideal place to start mining.

“I think we get away with 10 to 12 years of mining with very little waste generation,” the Northern Dynasty CEO said.

While mining this easiest section of the deposit, the Pebble Partnership can sink a shaft to further evaluate Pebble East and decide whether to underground mine this higher grade ore body, which also produces little waste, or widen the open-pit at Pebble West.

Collier said that the designs for the various mine, tailing storage, mill location, supporting infrastructure, etc. have already been completed and the exercise of determining the best project to present for permitting is akin to a smorgasbord – selecting a combination of these various scenarios that strikes the right balance of economic viability, environmental stewardship and public acceptability.

“The design work is not the challenge for us, because we have all of the designs rights there on the shelf,” the Pebble CEO explained. “The issue for us is, among all these options, which ones are we going to choose.”

He told Mining News that the Pebble Partnership has already substantially narrowed down these options “and made some decisions that are going to surprise people because it is going to be so dramatically different what people have been expecting Pebble to look like when it finally puts its plan on the table.”

Repositioning Pebble

A newly formed advisory committee will likely be the first at the table when the mine plan is presented.

Consisting of strong personalities with high integrity, many of which are skeptical of any plans to develop a mine at Pebble, this panel is going to be a tough audience.

Willie Hensley, a respected Alaska Native leader; Kim Williams, former executive director, Nunamta Aulukestai; Jim Maddy, former president, League of Conservation Voters; General Joseph Ralston, former vice chairman, Joint Chiefs of Staff; and Terrence ‘Rock’ Salt, former deputy assistant secretary, Army Corps of Engineers are the founding members.

The Pebble Partnership welcomes the critiques it anticipates from this panel.

The formation an advisory group is one of the facets of a larger strategy to make people living and working in the region more comfortable with having a world-class mine as a neighbor.

Providing tangible economic benefits across the Bristol Bay region is another.

One such way to ensure the people across this vast section of Southwest Alaska benefit from development of a mine is to set up some type of revenue sharing for residents and Native village corporations.

Other world-class deposits in Alaska, such as the Red Dog zinc mine and Donlin Gold mine project, are located on Native owned lands. This is an advantage to the local populations, who see tangible benefits from the operation.

While Pebble, located on state lands, would help to send badly needed money to Alaska coffers and would be an extremely significant economic contributor to the Lake and Peninsula Borough, which covers the area where Pebble is located, the larger Bristol Bay region does not currently have a way to directly draw economic benefits from the rich copper-gold-molybdenum-silver deposit.

Collier said the Pebble Partnership is currently considering a program that would extend revenue sharing to the larger Bristol Bay region.

Providing contracting opportunities to Native village and regional corporations in the region and across Alaska is another advantage a Pebble Mine could offer.

A key aspect to this is for the Pebble Partnership to let these Alaska Native corporations know what type of contracting needs the mine will have and help ensure that they are prepared to fill as many of those needs as possible.

Collier said Pebble is planning to bring in a mentor who can match Native corporations with specific contracting opportunities at Pebble. This would be followed up with training to ensure the groups have a workforce ready to fill the roles when the time comes.

Another major economic benefit the mine could provide to Bristol Bay residents and fishermen is low-cost power. Thiessen believes the power brought into the region for a mine a Pebble could cut the cost of power across the region by as much as 80 percent, a substantial savings for Bristol Bay residents and fish processors.

“I think there are going to be whole series of things we are going to start talking about, now that we don’t have to talk about EPA killing our project,” Collier said. “And I think it is going to be a much better and more interesting discussion for us, the people of the region and the people of Alaska.”

Boots on the ground

With the permitting door now open and plans to enter that door by the end of the year, the Pebble Partnership is gearing up for a field program at the project.

“We will have boots on the ground, on the site, doing some work, and that is the first time in a number of years,” Collier said.

Thiessen told Mining News that a relatively modest program to collect the final bits of data needed prior to applying for permits is planned.

This is good news for area residents who have worked at the Pebble project or provided services to the Pebble camp in the community of Iliamna in the past.

"We're very pleased the project is moving forward, and that we're in a position to begin to re-hire local residents and Alaska firms that have contributed so much to Pebble's advancements in years past," Collier said.

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