Fairbanks Alliance 2012

SEPTEMBER 28, 2012 FAIRBANKS ALLIANCE CONFERENCE 1

S F id S b 28 2012


PUMP FICTION

Starts Friday, September 28, 2012 at

Fairbanks Princess Riverside Lodge Fairbanks, Alaska

whats the Truth about Fueling Our Future

produced byThe Alaska Support Industry Alliance

Local Mining Updates Gas Price Gouging in Alaska?Drilling UpdatesTAPS UpdatesReigning in the EPA

Special Guest Appearances by Representative Mike Hawker,

Dr. David Evans and goldnerds.com

Starring

2 FAIRBANKS ALLIANCE CONFERENCE SEPTEMBER 28, 2012


Alaska Journal of Commerce Telephone: 907-561-4772

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Welcome!By being a part of todays event, youre taking an active

part in the future of Alaskaour economic security, our quality of life and our ability to control our own destiny.

The more than 460 members of The Alaska Support Industry Alliance provide jobs for more than 35,000 Alaskans. We build and train, design and program, fi nance and explore, manufacture and ship. We are the lifeblood of Alaskas economy.

We support responsible exploration, development and production of Alaskas oil, gas and mineral resources, for the benefi t of all Alaskans. It is a mission fi lled with challenges, and also unlimited opportunities, limited only by our commitment and our vision.

We also support Fairbanks. This community faces incredible and daunting challenges from the cost of energy to the future of resource development to the evolving role of the United States military in Alaska. But we are used to challenges. This communitys citizens, industries and history are integral in the success and future of Alaska.

We at The Alaska Journal of Commerce and Morris Alaska are proud to play a small part in preparing the program you are reading now. It is a labor of mostly love that allows us to give back to the industries that we report on and help promote throughout the year.

We are all in this together. And we are making Alaska work, every day.

Lee LeschperAlaska Regional Vice PresidentMorris Communications


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PAGE 6

PAGE 30 PAGE 26 PAGE 36 PAGE 34

PAGE 16

Delegation slams NPR-A plan; conservation groups pleased ................. page 9

Reviewers say EPAs Pebble study needs more work ............................. page 12

Great Bear now drilling on its first shale oil test wells ............................ page 15

Winter exploration includes discovery, disappointment for Pioneer ....... page 15

TOTE will convert to LNG in deal with EPA on emissions ....................... page 20

Donlin Gold files for state, federal permits .............................................. page 22

BP tests for extension of Milne Point field ............................................... page 22

Legislators look at costs, cures of energy woes ..................................... page 23

Gold find adds 1.2M ounces at Pogo mine ............................................. page 24

Kodiak crews open search and rescue base in Barrow ........................... page 27

Study: $22M annual savings with energy rebate program ..................... page 32

BLM plans cleanup of one old well, may add others .............................. page 33

Parnell signs bills expanding AIDEA finance ability ................................. page 33

UAF needs $200 million power plant replacement, and now .................. page 38


Productivity keeps expanding

at Fort Knox


By Tim BradnerAlaska Journal of Commerce

The life of the big Fort Knox gold mine northeast of Fairbanks keeps getting extended as its owner and operator, Fairbanks Gold Mining Inc., fi nds ways to increase productivity at the mine by profi tably extracting lower grades of ore.

Fairbanks Gold Mining Inc. is a subsid-iary of Toronto-based Kinross Gold.

Fort Knox is a large conventional surface mine now in its seventh phase of expansion, and the mine operators are continuing ex-ploration for future expansion. Fort Knox is expanding its capacity in several ways, in-cluding a project in 2013 to raise the level of the mines tailings storage dam by 25 feet.

There have been several expansions of the height of the dam in the years since produc-tion started, most of them in increments of 30 feet to 50 feet. The inert rock material left after gold has been extracted, the tailings, are stored behind a large containment dam.

An achievement for the mine operators is that the effi ciency and productivity of the Fort Knox heap leach facility designed to process very low grades of ore has exceed-ed expectations.

The companys original plan was to deliver 14 million tons per year of low-grade ore to be stacked on the heap leach for processing, but this year about 31 million tons will be placed, according to Eric Hill, operations manager at Fort Knox.

With the expanded volumes of ore being placed, Fairbanks Gold is also planning to double the capacity of the fl uid circulation system in the heap leach from 8,000 gallons per minute to 16,000 gallons per minute, Hill said. The expansion will be done by late summer in 2013.

The heap leach is a facility where a cya-

See Fort Knox, Page 8


nide solution is circulated through the stacked low-grade ore in a closed cir-cuit. At the end of the process gold is extracted from the solution, which is then reused to extract more gold.

This is a supplement to the ore pro-cessing mill at Fort Knox, where ore of a higher quality in gold content is crushed and ground mechanically so that the gold can be separated. The mechanical grinding reduces the ore to a powder with the consistency of table salt before the gold is extracted using a chemical leaching process.

Higher grades of ore are processed in the mill and lower grades are sent to the heap leach, which are not economic to process in a mill.

The heap leach is designed to con-tain 160 million tons, and so far about 53 million tons of ore have been placed, Hill said.

The mine operators are always look-ing for ways to increase effi ciency.

As the cost of energy remains high we are constantly relooking at what we are doing, in an effort to fi ne-tune operations, said Anna Atchison, the mines community and government re-lations manager.

There is no well-defi ned limit to the edge or depth of the ore body, but rather changes in the grade of the ore as the extremities are reached. What can be mined is determined by a combination of gold prices and costs, and if prices are high, as they are now, ore of a lower-quality can be mined, Atchison said.

Costs are also part of the equation, however, and those are rising, par-ticularly for electricity to power the process facilities and fuel for the fl eet of shovels, loaders and large trucks used in mining.

Electricity is the mines second larg-est operating cost, next to wages and benefi ts Atchison said, with $39.9 mil-lion paid in 2011 to Golden Valley Elec-tric Assoc., the Interior electric co-op.

Fort Knox produced 358,000 ounces of gold last year. Typically the mine has produced 300,000 to 350,000 ounces per year since production started.

The mine is an important part of the Fairbanks North Star Borough econo-my, employing 560 with an average an-nual wage of $92,000, twice the aver-age annual wage in the borough. The annual payroll, in wages and benefi ts,

is about $68 million per year.Energy is the number one concern

of businesses in the Interior, including ours. It is a top concern of our employ-ees as well, she said.

Kinross supports all of the initiatives under way to bring lower-cost energy to the Interior, including the various gas pipeline options and a proposed plan to truck liquefi ed natural gas from the North Slope, Atchison said. The LNG trucking option is being studied by GVEA, the electric co-op, and Flint Hills Resources, which operates a crude oil refi nery at North Pole, east of Fairbanks.

The Fish Creek area, where Fort Knox is located, has been mined for years by

placer miners who knew of the pres-ence of the large, low-grade ore body, but lacked the technology to develop it. Recent development efforts began in the mid-1980s, and construction of the mine began in 1995, followed by the fi rst pour of gold in December 1996.

In April 2011, the mine achieved 5 million ounces of production.

Fort Knox is now expected to continue mining until 2018 with the processing of ore, mainly at the heap leach, to continue until 2022. However, Kinross is exploring ways to extend the mines life.

Tim Bradner can be reached at [email protected].

Fort Knox:Continued from Page 7


Delegation slams NPR-A plan; conservation groups pleasedBy Tim BradnerAlaska Journal of Commerce

Interior Secretary Ken Salazar announced Aug. 13 he has chosen a preferred alternative for a land management plan for the 23-million-acre National Petroleum Reserve, although details of the plan remain sketchy.

The newly-proposed Alternative B-2 management plan would open 11 million acres of the reserve to oil and gas leasing but would also place 13 mil-lion acres in special conservation areas, Salazar said.

Details of the new alternative arent yet available, but state of Alaska offi -cials arent happy about it.

Were still looking at it but off the cuff we have signifi cant concerns about what they are trying to lock up, state Natural Resources Commissioner Dan Sullivan said. The petroleum reserve is supposed to be for oil and gas.

An overriding concern, Sullivan said, is that the state wasnt given any advance notice of the new alternative.

We are not brought in as a partici-pating entity. It seems like they consult more with the Center for Biological Di-versity (an environmental group) than they do with the legally-elected state government, Sullivan said.

What reinforced Sullivans belief is that the Wilderness Society and Na-tional Audubon Society issued press releases minutes after the Department of the Interior announcement, an indi-cation that the groups were informed in advance of the action.

A major concern in the pend-ing NPR-A plan is whether a pipeline crossing would be allowed across NPR-A to bring any oil discovered in the Chukchi Sea to the Trans Alaska Pipeline System.

In his press conference, Salazar said a pipeline corridor would be allowed although the specifi cs of a route must await an application from industry. A pipeline crossing of a special use area or other industry will be subject to spe-cial stipulations to protect the uses of the special areas, the Secretary said.

Our plan will not foreclose a pipe-line, but when one is proposed it will have to go through the full regulatory process including an environmental impact statement, the Secretary said.

The Interior Department has been

considering several alternatives for managing the reserve, one an Alter-native A continues the status quo; a second, more environmentally restric-tive Alternative B that establishes large special conservation areas; an Alterna-tive C that is less restrictive, and an Al-ternative D that essentially opens all of the reserve to oil and gas development.

Until Monday the department had not selected a preferred alternative. The new B-2 plan is now the preferred one, Salazar said. It combines elements of the other plans, but Salazar did not provide details Aug. 13 in Anchorage.

The preferred alternative will now be incorporated into a fi nal environmental impact statement for the NPR-A. The EIS is expected to be fi nalized in No-vember and the Record of Decision, the fi nal step, in December, U.S. Bureau of Land Management Director Bud Mike Pool said at the briefi ng.

In the next few weeks we will be meeting with the state of Alaska, the North Slope Borough and other con-cerned Alaska stakeholders to go through the details, Salazar said.

U.S. Bureau of Land Management spokeswoman Ruth McCord said the agency is still working out details of the preferred alternative, but a lot of information is provided on the BLM Alaska website.

Alaskas congressional delegation was quick to criticize the plan.

Sen. Lisa Murkowski said: The ad-ministration has picked the most re-strictive management plan possible. The environmentally-sensitive Tes-hepuk Lake area was already under a 10-year deferral for additional study, but this (new) alternative goes vastly beyond that, putting half the petroleum

reserve off limits. The decision denies U.S. taxpayers both revenue and jobs at a time when our nation faces record debt and unemployment, Murkowski said in a statement.

In his statement, Rep. Don Young said: While this administration is tout-ing todays announcement, its crucial-ly important for us to see the details, especially since it appears this is sim-ply a minor revision of an older plan that places many areas off limits while also designating new areas as so called Wild and Scenic Rivers. This is unac-ceptable and as long as Im in Washing-ton, D.C., these recommendations will never see the light of day.

Democratic Sen. Mark Begich was less harsh than his Republican col-leagues, but said, I am very concerned about this choice by the Department of the Interior. The new preferred alterna-tive still seems to close off several op-tions for building a pipeline across the NPR-A.

Begich continued, Weve known since the beginning that a pipeline across the NPR-A is a critical piece of the puzzle for successful Arctic devel-opment. I was pleased by Secretary Salazars statement that the United States cannot be left behind in the Arc-tic. However, todays decision creates many more questions than answers about how we are going to get billions of barrels of oil from the Chukchi Sea into TAPS.

Conservation groups praised the al-ternative, however.

If adopted, the preferred manage-ment strategy would protect the calving grounds of the Teshepuk Lake and West-ern Arctic caribou herds, the Wilderness Society said in a statement issued Aug. 13. Essential nesting habitat for thou-sands of shorebirds, molting habitat for geese, and coastlines used for walrus haul-outs and polar bear dens would not be developed under this plan.

The Audubon Society voiced similar sentiments.

The Secretarys plan shows that Americans can protect nature even on lands designated for energy produc-tion. It would be a great victory for birds, wildlife and common sense, Audubon president David Yarnold said in the statement.


PHOTO/AP

Natural Resources Commissioner Dan Sullivan joined the Alaska Congressional delegation in criticiz-ing the federal plan for NPR-A.


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Reviewers say EPAs Pebble study needs more work

PHOTO/AJOC

Pebble Limited Partnership Vice President of Communications Mike Heatwole is seen at the Pebble deposit with Frying Pan Lake in the background in this 2011 photo.



Scientists reviewing a U.S. En-vironmental Protection Agency assessment of a potential large copper and gold mine in an environmen-tally sensitive area near Iliamna Lake said Aug. 8 that the agencys draft wa-tershed assessment needs work, and should not be based on hypothetical mine scenarios.

Some of the scientists said the agen-cy is too pessimistic in its assessment of risks. The EPA asked 12 scientists to review its Bristol Bay watershed as-sessment last May as an independent review panel.

As a risk assessment, I would like to see more bracketing of the scenarios and performance. This assessment goes more toward the pessimistic outcomes. Im not comfortable with how it is put together, said Dirk van Zyl, of the Uni-versity of British Columbia, one of the scientifi c reviewers.

Another reviewer, Steve Buckley of WH Pacifi c, agreed: I would like to see a broader range of potential impacts, he said.

Most of the scientists, however, agreed EPAs document is still a good start to-ward a risk assessment and that the pro-posed Pebble mine does pose risks.

The panel held three days of meetings in Anchorage Aug. 7 to Aug. 9. There were comments from the public Aug. 7, including the mine developers, with discussion Aug. 8 among the scientists themselves, but in a session that was open to the public.

The scientists continued discussions Aug. 9 in closed-door sessions.

Final recommendations by the panel to the EPA wont be completed until later this year, said its chair, Roy Stein of Ohio State University.

Anglo American and Northern Dy-nasty, working through a joint-venture company, Pebble Limited Partnership, have identifi ed more than 10 billion tons of ore containing copper, gold and molyb-denum at a site near Iliamna Lake south-west of Anchorage.

The mine, still in a preliminary plan-ning stage, is controversial because it would be in a watershed of rivers that support salmon spawning. This has prompted fi erce opposition from sports fi shing groups like Trout Unlimited and Alaska Native communities around

Bristol Bay, where salmon fi sheries are important.

In the Aug. 8 public discussions by the scientists, most of the review panel said the assessment was incomplete.

I see this as a screening-level as-sessment, a good start in identifying areas where additional information is needed, said William Stubblefi eld, of Oregon State University.

Paul Whitney, a wildlife ecology con-sultant based in Portland, Ore., agreed: This is good as a screening study but its incomplete, for one reason that it looks at all wildlife impacts from the perspective of fi sh only.

The interactions are really much more complex, he said.

We know the scenarios were taken from those developed early by Northern Dynasty Minerals for investors, and that there are alternatives, said David Atkins, a scientist with Watershed Environmen-tal and a member of the review board. There are many ways this mine can be developed, and it may be that a smaller mine will be permitted. But the compo-nents are still there, an open pit, tailings disposal and all the infrastructure that will be needed.

The scenarios in the assessment doc-ument are plausible at a gross level, but how they would be implemented is un-clear.

Buckley, of WH Pacifi c, agreed: I dont feel the scenarios are suffi cient. Three or four in addition would be helpful.

Dirk van Zyl said the scenarios were not realistic but that he also doesnt see any regulatory agency as having the ap-petite to permit or a fi nancial institution to fund a 78-year mine.

A 30-year mine, yes, he said.Buckley highlighted another shortcom-

ing in that the importance of surface wa-ter and groundwater in sustaining habi-tat were discussed in the assessment but that there was little about how the two are connected in the area where the mine would be developed.

Phyllis Weber, an ecology consultant with Scannell Scientifi c Services, said, The assessment has provided a good over-view but its incomplete. More is needed on the specifi c habitats including how marine nutrients are distributed.

Charles Slaughter, of the University of Idaho, said the assessment is incom-plete because it does not address the

See Pebble, Page 14


full range of future developments that would result from the Pebble mine, in-cluding other mines.

The assessment gives short-shrift to that, Slaughter said. There will be a lot more affected that by the footprint of this one mine.

In a separate comment, Slaugher said the EPA failed to reference work that other federal agencies have done, including studies by the U.S. Bureau of Land Management in the 2005 BLM area plan, which closed parts of the re-gion to mineral entry.

Thats not even mentioned, by EPA, Slaughter said.

More scenarios neededSome on the panel said the assess-

ment needs more bracketing with scenarios across a wider range of pos-sibilities. The scenarios chosen appear more pessimistic outcomes, they said.

Stein, the panel chair, said he felt the assessment needed a discussion of climate change effects, which will oc-cur over a project like Pebble that could produce for a century. He also said he was gravely concerned about the size of the mine and that water from the mine area will need treatment in perpetuity. That was mentioned in EPAs assess-ment in three places, Stein said.

We have no example today of a mine with very long-term treatment of wa-ter, he said. I am very concerned that the promises of todays mine developers may not carry forward to future mine operators.

John Stednick, of Colorado State University, said the mining industrys treatment of water goes back to the mid-1980s. Were talking about something that could be producing acid drainage for 40,000 years, he said.

Mining companies traded publically have only recently been noting the fi -nancial liability of maintaining long-term water treatment in their fi nan-cial statements. One that Stednick is aware of is Teck, which noted liabilities stretching to 120 years in its 2010 and 2011 statements.

Steve Buckley, of WH Pacifi c, said the Red Dog Mine near Kotzebue, al-though smaller than Pebble, is valuable to look at as an example of a mine with water treatment operating in an upland Arctic environment.

Stein said he is concerned whether there will be suffi cient long-term over-sight of the project by government agencies. The mine is on state lands, so the primary regulatory responsibility is with the state of Alaska.

Will the state be able to appropriate funds suffi cient for oversight and moni-toring? he asked.

Tailings dam There was also discussion among

the scientists of the scenarios of cata-strophic failures of the tailing dam.

Dirk van Zyl questioned whether the scenarios of failures laid out in the as-sessment are representative of facilities being built today. The practice now is to establish independent tailings dam re-view boards to oversee regulatory pro-cedures and monitoring.

I do not know of a failure at any facility where such a review board was put in place, he said. The failure like-lihood (in the EPA assessment) is over-stated.

There was disagreement about that, however. Paul Whitney, another of the reviewers, said he was aware of sediment transport as far as 600 miles downstream after problems developed at hydroelectric dams in British Co-lumbia.

A sediments transport study should be required to understand the impact of a dam failure in this environment, he said.

Phyllis Weber said she is less con-cerned about catastrophic failures of the tailing dam than low-level seepages over extended periods.

There could be seepage from pit walls, or waste rock that is not quite as benign as thought. This is a problem that should be addressed.

Stednick, of Colorado State, said the higher altitude and cold climate of the Pebble region may make post-mine rec-lamation diffi cult.

Restoration will take a very long time and were talking about more than the mine, but road corridor as well. This is multi-generational, Stednick said.

However, Paul Whitney, a consul-tant and a member of the review panel, said there are many examples of recla-mation using modern techniques, and that the EPAs assessment relied on outdated examples.

Why use the older examples? Weve moved forward, Whitney said.

Off-site mitigation for any restora-tion that cannot be done in the mine area could be diffi cult.

Is mitigation even possible? This is a large pristine area, and it will be dif-fi cult to fi nd enough non-pristine areas to bring back, said Paul Whitney.

Whitney also pointed out, however, that the area may not be as pristine as it fi rst appears.

If 70 percent of the organic nutri-ents go to fi sh that are harvested, is the area really pristine? he asked. If that is the case, could one way to accom-plish mitigation be to restrict commer-cial fi shing, of salmon spawned by the streams in the Pebble area.

Whitney said he is concerned about the loss of marine nutrients in the up-lands of the watershed, where the mine would be located. He said there should be more focus on this, and that the Alaska-based marine scientists with the university and the state have done a lot of work on the loss of marine nu-trients in ecological systems.

Developers satisfi edThe mine developers were generally

pleased with the direction the panel ap-peared to be taking.

They clearly heard our message Tuesday (Aug. 7), during public com-ments, said Thomas Collier, an attor-ney working with Northern Dynasty Minerals. Seven out of the 12 opening remarks (in the Aug. 8 open session) indicated the panel members dont see how a risk assessment can be done us-ing only hypothetical assumptions.

Several of the scientists said the EPA assessment is more of an initial screen-ing study rather than a true risk as-sessment, which involves a much more detailed review.

That is the correct way to view this document, Collier said.

Collier said he doesnt believe the as-sessment is suffi cient to support a pre-emptive veto of the Pebble project under the Clean Water Act 404(c) action.

Its likely they will just throw it back into the normal process, where a for-mal environmental impact statement is done after the mine developers ap-ply for permits with details of an actual project.

Pebble spokesman Mike Heatwole said the developers are at least a year away from fi nalizing the proposed mine design and permit applications. One the permits are applied for a formal en-vironmental impact statement process will begin, he said.


Pebble:Continued from Page 13


Great Bear now drilling on its first shale oil test wells

Winter exploration includes discovery, disappointment for Pioneer


Great Bear Petroleum is now drilling its fi rst North Slope test well to assess potential for production of oil from shale forma-tions in the region, similar to the way oil is being produced in the Bakken and Eagleford shale formations of the Lower 48 states.

The companys fi rst well is now be-ing drilled about 15 miles south of the Prudhoe Bay fi eld on the North Slope, said Ed Duncan, Great Bears presi-dent. The fi rst core samples were tak-en July 1.

We intend to take cores from three shale formations the well will pene-trate, Duncan said.

Duncan said it will take about three more weeks for the well to reach its planned target depth of about 10,500 feet. Great Bear will then move its rig, Nabors 105, operated by Nabors Alaska Drilling Co., to a second location about three miles farther south. Drilling will continue to move farther south, Dun-can said.

Our plan is to drill four wells this year and we believe we can achieve at least three, he said.

The company will also do a multi-

stage fracturing of the shale to test the fl ow of oil, Duncan said.

Normally, North Slope exploration wells are drilled in winter on ice pads but Great Bear is working this sum-mer using previously-built gravel pads adjacent to the Dalton Highway, a road connecting oil fi elds in the area to In-terior Alaska.

Halliburton, the oil services giant, has joined Great Bear as a partner in the North Slope shale test but Duncan declined to describe the natural of the companies relationship.

He did say Halliburton is participat-ing in the current tests but that Great Bear, an Alaska-based independent company, is the operator of the project.

The shale formations being tested by Great Bear are the source rocks for the large conventional oil fi elds a few miles north, including the giant Prudhoe Bay, Kuparuk, Alpine and other fi elds that are now producing. Great Bears belief is that there is a substantial amount oil left in the rocks.

If the 2012 tests of the shale are suc-cessful, Duncan said the plan for 2013 is to drill several wells in a production pad along with a pilot processing facil-ity. Oil produced would be shipped to Prudhoe Bay by truck and injected into the Trans Alaska Pipeline System.

Bob Swenson, Alaskas state geolo-gist and director of the Division of Geo-physical and Geological Survey, said he believes substantial amounts of oil remain in the source rocks.

Paul Decker, chief of the resource evaluation section in the state Division of Oil and Gas, said in a recent presen-tation that Great Bear must test the brittleness of the North Slope shale to see whether it will fracture like shales in the Bakken and Eagleford, and also test the permeability of the rock, and how easy fl uids can fl ow.

There are high hopes for Great Bear and its experiments with shale oil. If it works, it could lead to a major shale oil development across an east-west fair-way of lands across the central North Slope, through an area south of the Prudhoe Bay and Kuparuk fi elds.

Conceptually, what Great Bear is planning, if the tests are successful, are gravel pads with several producing wells on each pad spaced several miles away and connected with roads and pipelines. Potentially the development could be very large, requiring several pads and roads.

One unknown is whether the tradi-tional high costs of the North Slope will make shale oil development uneconom-ic, however.


Pioneer Natural Resources Co. has made a modest oil dis-covery in an exploration well drilled this winter but results of anoth-er well are still uncertain and a third well was a disappointment, according to the company.

Pioneer CEO Scott Sheffi eld an-nounced the drilling results during an analysis of Pioneers fi rst quarter re-sults given to investment groups.

The Nuna No. 1 well drilled into the Torok geological formation that is part of the Ooogurk Unit fl owed at 2,000 barrels per day. The company estimates that the fi nd will add 50 million barrels of recov-erable reserves estimates at Torok.

A second well drilled into the Nuiqsut formation, one of the formations in the Oooguruk fi eld now producing, fl owed at 4,000 barrels per day but tapered off during a production test, Pioneer

spokesman Casey Sullivan said in an interview following Sheffi elds remarks.

A third well, Sikumi, was at an off-shore location but found water instead of oil, Sullivan said. Sikumi was drilled into the deeper Ivishak formation, which is the main producing formation in the large Prudhoe Bay fi eld south-east of Oooguruk.

The Oooguruk fi eld is now produc-ing about 5,820 barrels per day.

Sheffi eld said Pioneer used a new technique, mechanically diverted frac-ture stimulation, in the exploration wells. Sullivan said the technique en-hanced the effectiveness of fracturing the tight reservoir rocks being tested, and the results of the trials were positive.

Pioneer is still reviewing the results of the Nuna well and may drill a second well to appraise the discovery, Sullivan said. That decision may come soon be-cause of the time needed to contract for support services as well as permits for drilling next winter, he said.

No decisions have been made as to how the discovery might be developed.

The next step may be the appraisal well but to get fund this we must com-pete with other Pioneer projects, Sulli-van said, which is a challenge given the high state production tax.

Pioneer is very active in drilling in Lower 48 shale oil projects in states where taxes are lower than Alaska and where the geologic and permitting risks are fewer.

The Torok is now estimated to have about 650 million barrels of oil in place, or oil physically in the reservoir rock, of which about 15 percent to 20 percent might be commercially produced.

Much of the formation lies under leases held by Pioneer but part of it ex-tends into adjacent leases, according to sources familiar with the prospect. The 50-million barrel addition resulting from the Nuna will be to the commer-cially produced estimate from Pioneers leases on Torok, however.


BP defers development of small offshore Liberty field in Arctic



BP has deferred develop-ment of the small Liberty fi eld in the Beaufort Sea northeast of the Prudhoe Bay and Endicott fi elds, this time indefi nitely. The company would give no time-table on when the project could be developed.

BP spokeswoman Dawn Patience said June 29 that technical problems with the companys plan to produce the fi eld with ultra-extended reach production wells drilled from shore have caused the company to revamp the project after an 18-month review of the development plan and a heavy drill rig was built to drill the wells.

Our review showed that the proj-ect cost would be substantially high-er than the $1.5 billion we had esti-mated, and that it would take several years longer to complete, she said.

Liberty has estimated reserves of 100 million barrels and is fi ve miles offshore in shallow water. If devel-oped, BP believes it would produce about 40,000 barrels per day at peak, Patience said.

The current plan, now on hold, is to drill extended-reach wells to the reservoir from a satellite gravel production island that is part of the Endicott fi eld, which is two miles off-shore and connected to shore by a gravel causeway. The wells that were

planned would be as long as eight miles in horizontal departure from the drill rig, and set world records, BP has said previously.

The specialized, special-purpose rig for the Liberty project has been constructed and is now on the North Slope at the Endicott fi eld produc-tion island. BP owns the rig but it was built by Parker Drilling Co.

Patience said discussions are un-der way with several companies who were involved with the rig, but those are confi dential.

BP and other companies had hoped that development of Liberty with wells drilled from shore would demonstrate that capability and possibly open oth-er near-shore deposits to development using similar techniques.

Other options for developing Lib-erty will be discussed with federal and state regulatory agencies, Pa-tience said. A decade ago BP devel-oped a similar small offshore fi eld west of Liberty, the Northstar fi eld, with an artifi cial gravel island and a subsea pipeline to shore.

Northstar, which is six miles off-shore at Prudhoe Bay, has been in production since 2001, but with Liberty BP had rejected the artifi -cial gravel island approach because Northstar wound up costing more and taking longer to build than ex-pected.

One reason for the delays at Northstar was the extraordinary

scrutiny by regulatory agencies be-cause it was the fi rst true offshore production island in the Arctic.

Federal and state agencies, and the North Slope Borough, are very sensitive to any oil production in-stallation built in the ocean because of worries of problems with ice and an oil spill. The Endicott fi eld, built in 1986, is technically an offshore fi eld but it is close to shore, about two miles out, and water depths are so shallow, two to fi ve feet, that there is virtually no moving ice pres-ent in winter.

Northstar, however, was a fi rst because its production island was built beyond the protective barrier islands along the northern Alaska coast, so that the island is fully ex-posed to winter icepack movement and summer storms. Another fi rst was the construction of the fi rst bur-ied subsea oil pipeline, and although the distance was short six miles there were still concerns about goug-ing of the sea bottom by the keels of heavy packice that extend down in the water. In the last 10 years, the is-land and the pipeline have withstood those natural forces, however.

Liberty is almost the same dis-tance offshore as Northstar but is in a more benign ice environment because of barrier islands further offshore which block the heavy po-lar icepack. There is mostly stable shorefast ice at Libertys location.


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Totem Ocean Trailer Express Inc., or TOTE, will convert its two large ocean cargo vessels to use liquefi ed natural instead of conventional bunker fuel, the fi rst such conversion for large general cargo vessels in the U.S. maritime industry.

Liquefi ed natural gas tankers, such as those that call at ConocoPhillips LNG plant at Kenai, have used LNG as fuel for years but general cargo and other ma-rine vessels have been fueled by conventional bunker fuel and diesel.

TOTEs decision is part of an agreement with the U.S. Environmental Protec-tion Agency on a waiver for TOTE from new emissions requirements that went into effect Aug. 1.

The waiver will exempt TOTE from the requirements until September 2016, to allow the conversion of the companys two Orca-class cargo vessels, TOTE president John Parrott said Aug. 6.

TOTE operates the vessels on scheduled service from Tacoma, Wash., to An-chorage, a distance of 1,400 miles each way and 2,800 miles round-trip. They are both 840 feet in length. The ships will be able to carry enough LNG in on-board tanks to make a round-trip from Tacoma, Parrott said.

Our two vessels are already the greenest ships in the U.S. domestic fl eet, Parrott said in separate statement. When they were delivered in 2003 they were purpose-built to serve the Alaska market and exceeded all regulatory and environmental standards. Post-LNG conversion, the Orca vessels will again set a new standard for environmental responsibility.

EPA imposed the new rules requiring use of low-sulfur fuels effective Aug. 1 on ocean shippers and cruise ships in an Emissions Control Area that extends from the U.S. west coast to Alaska and 200 miles offshore. The requirement is for vessels to use fuel with no more than 1 percent sulfur as of Aug. 1, and 0.1 percent sulfur after 2015.

Parrott said the estimated capital cost of for conversion of both vessels is $80 million. Each vessel has six engines, four main engines and two auxiliary engines.

TOTE has signed a preliminary agreement with an LNG supplier but Parrott said he could not identify the fi rm at this time. The plan calls for a small gas liquefaction plant at the Tacoma port, and for the LNG to be delivered to the ships by barge.

The shoreside LNG infrastructure planned to support the new fuel systems will help other transportation industries in Puget Sound follow TOTE in convert-ing to LNG. This could result in a signifi cant increase in air quality throughout the Puget Sound region, Parrott said.

Parrott said the use of LNG as fuel will not affect the operations of the ships, including their speed and schedules to and from Alaska. The vessels are rated to cruise at a 24-knot speed but typically operate at about 22 knots on average.

TOTE currently uses a heavy high-sulfur fuel in its two vessels. Prior to the LNG agreement the company had planned to use a blend of its heavy oil with ultra-low sulfur diesel made by refi ners for trucks and heavy equipment on-shore to meet the requirements.

The blending would have required special handling by fuel suppliers and would have added about 25 percent to fuel costs, Parrott said in a previous interview. That would have translated to about an 8 percent increase in general freight rates.

Parrott could not estimate how the capital cost of the LNG conversions could af-fect rates because capital costs are handled differently than operating cost increas-es, such as those for the higher fuel costs had the special fuels been required.

It cannot be assumed that a capital cost will increase rates, Parrott said. As an example, when TOTE made the $320 million investment in the two new ships there was no signifi cant change in rates, he said.



TOTE will convert to LNG

in deal with EPA on emissions


Donlin Gold files for state, federal permits

BP tests for extension of Milne Point field


Donlin Gold LLC, subsidiary of Barrick Gold Corp. and NovaGold Resources Inc. has fi led permit applications to federal and state agencies for a planned $6.7 billion gold mine on the Kuskokwim River west of Anchorage, a Donlin Gold offi cial said July 27.

It is a milestone for the project, which has been more that two decades in exploration and planning, said Stan Foo, project manager for Donlin Gold. The project is on land owned by Calista Corp. and The Kuskokwim Corp., two Alaska Native corporations.

The permit applications came, how-ever, amid cautionary statements by To-ronto-based Barrick on July 26 in brief-ing to investors that the project, does not meet our investment criteria at this time, if the decision were made today.

NovaGold Resources, Barricks 50-50 partner, said in its own statement that it agreed with Barrick that high capital costs will pose challenges.

However, the timeline for the per-mitting process means the co-owners have approximately four years to make any major decision on the project, NovaGold said. NovaGold is a Vancou-ver, B.C.-based junior minerals explo-ration company.

Both companies said the work on

permitting will continue, which will take four to fi ve years, Foo said in an interview. The permitting and related environmental impact statement, or EIS, work will require annual spending of about $40 million per year. Barrick said the companies will also continue exploring alternatives to reduce costs.

Foo said applications were made to the U.S. Army Corps of Engineers for a Section 404 permit under the federal Clean Water Act, which also triggers the EIS preparation and review, and to the state of Alaska for permits related to a 300-mile pipeline that would transport natural gas to the mine from producing fi elds in Cook Inlet.

In a statement, NovaGold, noted the strengths of the project including re-sources of 39 million ounces of gold in the Measured and Indicated category and an additional 6 million ounces in the Inferred resources category. The average grade of the known deposit is 2.2 ounces per tonne, which, makes Donlin Gold one of the highest grade known large open-pit gold deposits, according to the NovaGold statement.

If developed, the project would pro-duce 1.5 million ounces of gold per year for the fi rst fi ve years and about 1.1 million ounces for the remainder of the mines expected 27-year life, Novagold said in the statement. However, there is potential for expansion of resources, which could extend the mine life.

NovaGold and Barrick, in their state-ments, both noted that the location of the project in the U.S., in a politically-stable region, was a positive element.

Mineral rights at the mine are owned by Calista Corp., the Alaska Na-tive regional corporation for the Yukon-Kuskokwim region, and surface lands are owned by The Kuskokwin Corp., or TKC, a consortium of village corpora-tions in the middle-Kuskokwim area.

Royalties paid to Calista would be shared with other Alaska Native re-gional and village corporations under terms of the 1971 Alaska Native Claims Settlement Act.

If constructed, the project would become a major employer. Up to 3,000 workers would be employed in con-struction over three to four years, and production operations over at least 27 years would employ up to 1,400, Don-lin Gold has said.

The mine would also encourage the development of new natural gas re-sources for Southcentral Alaska. The companys plan is to build a 312-mile 14-inch pipeline to bring gas from Cook Inlet to the mine, so that Donlin Gold would be a large new industrial cus-tomer for gas producers in the Inlet or for a pipeline bringing gas from the North Slope.

Tim Bradner can be reached a [email protected].


BP is planning a three-dimensional marine seismic survey this summer in shal-low Beaufort Sea waters in Simpson Lagoon to test for possible extensions of the Milne Point fi eld.

Milne Point is an onshore fi eld that is now producing, but parts of its reservoir ex-tend to the north under the Beaufort Sea. BP, which owns and operates Milne Point, thinks there is more oil there.

The survey will cover areas between Oliktok Point and

Milne Point on the Beaufort Sea coast, and is being done to support potential onshore developments BP would un-dertake, company spokes-woman Dawn Patience said.

We want to get a clear look and a better understanding of the reservoir to inform de-velopment opportunities and options in the Milne Point fi eld. Patience said.

Parts of the fi eld reservoir extending north under the ocean are being produced now with high-angle, extend-ed-reach production wells drilled from shore.

The survey will begin in mid-July and will operate

for about 50 days, Patience said. It will cover about 110 square miles including on-shore portions with the off-shore segment totalling 84 miles square miles, according to a notice published in the Federal Register July 6 by the U.S. National Marine Fisher-ies Service, which has issued permits to BP to deal with possible wildlife encounters.

The marine part of the survey will cover areas inside barrier islands where water depths are very shallow, to depths of 9 feet, and areas beyond the barrier islands to waters depths of 45 feet.

Three seismic source ves-

sels will be deployed in the operation by CGGVeritas, the contractor, according to the Federal Register.

In designing the survey, we worked closely with local communities and the North Slope Borough. The survey has been carefully timed and will be carefully conducted to avoid or minimize wildlife impacts and avoid interfer-ing with subsistence hunting and fi shing, Patience said in a statement.

The area is used by local Inupiat villagers to hunt bow-head whales during the an-nual fall migration as well as seals, fi sh and other wildlife.


Legislators look at costs, cures of energy woes

Juneau Empire

On July 11, Alaska legis-lators heard Wednesday some of the reasons for the states high gasoline fuel oil prices, and learned that they face diffi cult chal-lenges in reducing costs for Alaskans.

Some of the high prices are due to the states small population and lack of the kind of competition that can mean lower prices.

When you have these small mar-kets here there just arent a lot of competitors and that kind of oligopo-ly behavior happens, said Ed Sniffen of the Alaska Department of Law.

An oligopoly, which is a market dominated by just a few players, isnt illegal, Sniffen said.

We have a lot of monopolies in Alaska, monopoly pricing isnt neces-sarily illegal, he said.

It is only if a monopoly is created or maintained by illegal means that there would be a problem, he said.

Sniffen was testifying at Anchor-ages Legislative Information Offi ce as part of an informal committee hear-ing into the states high energy prices and what might be done about it.

Economist Barry Pulliam of Econ One, an economic consulting fi rm, said that small market is a big prob-lem for Alaska.

In bigger markets with more play-ers outside Alaska, the benefi ts of competition are more likely to be felt.

Theres always someone out there who is trying to gain a little bit of an advantage by competing on price, Pulliam said.

The fewer number of competitors, the less that can happen.

Alaska, at least in the cities, may have multiple fuel retailers, but they are all supplied by the states handful of refi neries, only two of which pro-duce gasoline, Sniffen said.

Sen. Fred Dyson, R-Eagle River, asked Sniffen to explain the situa-tion in Southeast, where gasoline

and heating oil doesnt come from the states refi neries but is barged up from Down South.

Sniffen said the lack of competi-tion was the same.

In Juneau there are only a couple of barge companies that barge fuel up from the Northwest, he said.

Western Alaska, where fuel is also delivered by barge, has similar is-sues, he said.

Sniffen said that one of the ways to improve things for consumers in Alaska would be to bring more play-ers into the market.

I subscribe to the fact that more competition will lead to better prices, he said. Lets see if theres a way we can make competition better.

Alaska is also hampered by a lack of fuel storage, Sniffen said.

Some of the states largest gasoline retailers might want to buy lower-priced gasoline in the Lower 48 and ship it to Alaska, but theres not the tank capacity for a full barge load.

That seems to be one of the bot-tlenecks that prevents a Fred Meyer, Costco or Safeway from getting a bet-ter deal, he said.

Also, youve got to have suffi cient volume for a full barge, you are not going to send half a barge to Alaska, he said.

The Alaska Industrial Economic Development Authority said it has looked into developing its own open-access fuel storage facility but hasnt yet done all the analysis needed.

The problem is we cant simply build the tanks and hope someone comes and uses them, said Jim Hem-sath, the agencys deputy director.

We must have a fi nance plan, moving fuel through them to pay off our obligations, he said.

Alaska has the smallest demand for gasoline of any state in the nation, with the refi neries focusing more of their attention on producing the more in demand jet fuel.

In jet fuel the state has a thriving

market, largely due to Anchorage In-ternational Airports key location in world markets, but also thanks to military purchases.

The jet fuel market is much differ-ent than the gasoline market, the key factor being that its customers are big, sophisticated players that have the ability barge up their own fuel.

Even if they dont do so, that keeps Alaska jet fuel prices in check, Sniff-en said.

Pulliam said it appears thats why refi nery margins on jet fuel were well below those they earn for gasoline.

One thing thats different, we do see that there is this extra piece of competi-tion, the ability of buyers to access sup-plies from outside the state, he said.

The committee also discussed the possibility of fuel price regulation.

The Regulatory Commission of Alaska, which controls what monopoly utilities in Alaska can charge, said that no one in the United States or Western Europe does that, and that an attempt to do so in another isolated market, Hawaii, was quickly abandoned.

Historically, that has almost al-ways been a bad idea, Sniffen said.

RCA Chair T.W. Patch told the legislators that if they are given that task they would want a clear directive and goals from the Legislature.

The policy decision is up to the Legislature, he said, but told the com-mittee if you determine that direct regulation is the way to go I ask that you provide us with a clear express-ing of purpose and authority.

Sen. Bill Wielechowski, D-An-chorage, chairing the meeting, said that Tesoro Corp., which owns the big Nikiski refi nery, had been invit-ed to the meeting but was unable to attend.

The Senate Finance Committee has decided to hire expert consultants to recommend ways of lowering the states energy prices, and the commit-tee will meet again later this summer to review proposals to do that.


Gold find adds 1.2M ounces at

Pogo mine



Drilling crews are busy on new exploration this summer at the Pogo gold mine near Delta, east of Fairbanks. It is the biggest exploration sea-son since the mine opened, says Lorna Shaw, external affairs manager for Sumitomo Metal Mining, which owns and operates the mine.

Efforts this summer are focused on defi ning the new East Deep discovery, a gold ore deposit discovered last year that is near the main Pogo ore body. The new discovery has added an estimated 1.2 million ounces of new gold resourc-es to Pogo, a major increase from the current 2.6 million ounces of reserves. There could be more gold, too.

East Deep has very high potential and weve really only touched part of it. Were looking for the limits this summer, Shaw said.

The discovery is not likely to result in increased produc-tion but would instead extend the operating life of the time.

This summer, three drill rigs are at work drilling from the surface and three rigs are drilling from underground locations in the mine, testing the East Deep deposit. Sum-itomo plans to do 94,000 feet of exploration drilling this year, with 86,000 feet drilled from the surface and 8,000 feet drilled underground.

Last year the company did 79,672 feet of exploration drilling.

In other developments, Pogo reached a milestone re-cently in exceeding the two-million-ounce production threshold. The mine produced 325,708 troy ounces of gold in 2011, a bit below the annual production average of 350,000 ounces to 380,000 ounces in recent years.

Typically, 2,545 tons of ore per day are mined and pro-cessed at Pogo. Based on the current reserves the mine is expected to operate through 2019, but with new discover-ies like East Deep the mine life could be extended.

Pogo employs 335 workers directly and there are about 150 contractor employees at present, Shaw said.

Bed space at the camp is tight this summer. We have 376 beds on site and we are near capacity

this summer, Shaw said. Making sure there is room for everyone, with increased construction and exploration, can be a bit of a jig-saw puzzle.

Sumitomo is now building added camp capacity, with 79 new beds, that will be available by the end of the sum-mer, Shaw said.

In operations, Pogo experienced high turnover rates among its employees after the mine fi rst started in 2007, but turnover is now reduced to levels that are normal for the industry, Shaw said.

Things have stabilized, but its still an issue, the com-pany is concerned about, she said.

Experienced underground miners tend to be tran-sient, Shaw said, because there is a high demand for them. The company likes to hire in Alaska, but the Alas-kan recruits tend to come in with entry-level skills for un-dergoing mining.

Underground crews must all include some experienced miners.

We cant have an underground crew with all entry-level people, she said.

Sumitomo is considered several ideas in training in-cluding possible programs with the University of Alaska Fairbanks similar to those operated by in Juneau by University of Alaska Southeast for the Greens Creek and Kensington underground mines.

Pogo is the only operating underground mine outside of Southeast Alaska except for the small Nixon Fork mine near McGrath. Other producing mines like the Fort Knox Mine near Fairbanks, the Usbelli coal mine at Healy and the Red Dog Mine north of Kotzenue, are surface mines.

While the skill sets for miners in underground and surface mines are different surface mines require ex-perience and skill in operating heavy equipment many jobs are similar in the mines, such as operators in the ore processing mills, mechanics, maintenance and other sup-port people, Shaw said.


Busy summer at Livengood gold project, with six drill rigs at work


International Tower Hills Mines is continuing develop-ment planning on the companys Livengood gold proj-ect on the Elliott Highway north of Fairbanks.Engineering and other work continues on a development

plan for the mine that is now due in mid-2013. Normally, a mining company does a pre-feasibility study to initiate per-mitting, followed by a feasibility study following the obtain-ing of permits. But at its Livengood project, ITH is combining the two into one feasibility study.

This study will provide our fi rst good look at the project we would like to take to permitting, said Karl Hanneman, the companys general manager for Alaska.

No fi gures are available yet on the required capital invest-ment, but Hanneman said it will be, substantial.

To gather information necessary to support permit appli-cations, ITH is doing baseline environmental monitoring and is now in its fourth year of that, said Rick Solie, ITH Com-munity and Government Relations manager.

Six drill rigs and about 85 people are working at the Livengood project site this summer on additional drilling, Solie said.

Hanneman said ITH also selected 11 tons of ore samples from core last January and shipped it out for metallurgical tests, the results which will help the company design an op-timal process for milling the ore to extract gold.

The Livengood project is on about 50,000 acres of min-ing claims but the known deposit covers just a few hundred acres, Hanneman said.

If it is developed, Livengood would be a large surface mine with a mill to extract gold from the mined rock. It would be similar to the Fort Knox mine that is now in production near Fairbanks, although probably larger.

Recent developmentsIn a June 21 press release, ITH board chairman Don

Ewigleben said the company has postponed its district-wide exploration drilling program to focus on the development plan. However, 18 condemnation and exploration holes and additional geotechnical holes are still being completed in the Gertrude Basin area of the mine.

The primary purpose of the condemnation program is to defi ne site facility locations, but it also has the potential to outline additional resources immediately east of the current-ly proposed mining operation.

While exploration programs have been deferred this year so we can focus on the more important goal of completing a feasibility study that would greatly de-risk the Livengood project technically, there still exists tremendous exploration potential in the Livengood district, Ewigleben said in the companys statement.

On Aug. 12, ITH announced drill results for 45 geotechni-cal and condemnation drill holes at the Livengood project, and assay results from four of the holes showed intersec-

tions with multiple grams of gold content. The location of the intercepts do not affect the current conceptual plan for the locations of mining-related infrastructure contemplated in the ongoing feasibility work, but they do show the potential for new discoveries in the area.

Another target is potential resources below the known ore body.

Exploration holes in the Money Knob deposit were gen-erally terminated at 200 meters to 300 meters below the surface due to limitations of the drilling technology used, Ewigleben said in the June 21 press release. To date, almost all the drill holes in the Money Knob have bottomed out in the gold deposit and six holes extending below the proposed pit bottom at the 300 meter depth penetrated intervals with similar gold grades to the main deposit.

Additional resources in this area, below the proposed pit bottom, may be identifi ed by drilling done as the mining op-eration proceeds, the release said.

Irwin to lead projectIn an important personnel announcement, ITH named

former state Natural Resources Commissioner Tom Irwin as Alaska vice president and president of Tower Hill Mines Inc., the U.S. operating subsidiary.

Separately, Hanneman was named as the companys Alaska General Manager, taking over the position previously held by Irwin. The appointments were announced Aug. 16.

Irwin has 35 years of experience in natural resources in Alaska, Nevada and Colorado, and played a major role in

See Livengood, Page 27


Kodiak crews open search and rescue base in Barrow By Nicole KlaussKodiak Daily Mirror

The Coast Guard has offi cially launched aviation op-erations here, the northernmost city in the United States.In a place where whale bones are scattered in front yards,

pipelines run aboveground, and trash cans are spray-painted with positive messages like kids are our future, the Coast Guard is something new.

For years, the 4,200 people of Barrow sailed the Arc-tic without the Coast Guard. The North Slope Borough search and rescue team took care of its own people, and the Coast Guard was called only in extreme cases. Times have changed.

Barrow is surrounded by open tundra and the Arctic Ocean. As sea ice continues to disappear, the city will begin to experience increasing boat traffi c, both from companies planning to drill for oil and travelers looking for a shortcut from the Atlantic to the Pacifi c.

That is why the Coast Guard sent an aviation team more than 900 miles from its home in Kodiak to Barrow: It needs to be prepared if something goes wrong.

Arctic Shield 2012 is the result of that preparation. The Coast Guard has sent outreach teams into the North Slope for several years, but this is its biggest deployment yet and the fi rst that will allow it to provide around-the-clock search and rescue.

The Coast Guard sent two MH-60 Jayhawk helicopters with support teams to Barrow to reduce response time to incidents in the Chukchi and Beaufort seas. They arrived in Barrow two weeks ago.

From July to October, the Coast Guard will have the two teams working out of a small rented hangar at Wiley Post-Will Rogers Memorial Airport.

The Coast Guards fi rst offi cial day of search and rescue operations was Monday, the same day a new team arrived.

We just started to bring people up for (search and rescue missions), Lt. Randall Black told the Kodiak Daily Mirror (http://is.gd/hFTR8e).

Black is one of the pilots making the 900-mile commute to Barrow this summer, bringing parts, fuel and people from Air Station Kodiak. The Coast Guardsmen are stationed at the Barrow location for two to three weeks at a time, then re-placed by a new group. Its a rotation used by North Slope oil workers and now taken up by the Coast Guard. The aviation detachment uses 15 people; the supporting communications detachment has 11.

Black estimates around 15 trips will be made to Barrow, unless more are needed. Were the engine that makes every-thing run, and we enjoy that, he said.

Operating out of Barrow is diffi cult, even for pilots used to Kodiaks ferocious conditions. Barrow combines fl at tundra, strong winds and low cloud cover, which makes fl ying dif-fi cult. Theres a learning curve, Lt. Tim Williams said. Its a new area.

Logistically, the Coast Guard has to make sure it has the right equipment and supplies in advance. Anything not on hand has to be fl own from Kodiak, causing delays. Were maximizing what we have, Williams said. If a helicopter needs a part it takes at least three hours to get here.

The Coast Guard has also been working to minimize the impact it has on residents. Barrow has few places for tem-porary workers to stay, and limited facilities for people who dont live year-round. Adding 26 people and two hungry he-licopters to the town might otherwise put an added burden things like grocery stores.

There is a lot of subsistence here, Williams said. We dont want to interfere with that so we take operations out-side of the town.

The team has done some community outreach over the last few weeks to help Barrow residents understand why the Coast Guard is working there.

An open house last week gave residents the opportunity to Coast Guardsmen and the North Slope Borough rescue team, then look over their aircraft and equipment.

Coast Guard Lt. Vincent Jansen also gave a briefi ng dur-ing a North Slope Borough assembly meeting to discuss the Coast Guards planned aviation operations around the area.

For the fi rst week and a half everybody didnt know what to expect, Lt. Tony Dewinter said. Weve been talking to people. We go out into the community, and everyone has questions for us.

The Coast Guard group who fl ew back to Kodiak on Mon-day said the communitys response has been welcoming.

Everyone was really nice, Coast Guard aviation elec-tronics technician Jason Pope said. Wed walk to work and theyd talk to us.

Extensive ice coverage has meant ship traffic is slow to arrive in the Arctic this summer. Conditions are ex-pected to change in the next few weeks, and when boats arrive, the Coast Guard may have a chance to put that talk into action.

the development of the Fort Knox mine near Fairbanks for Kinross Gold Corp. He also served as state resources commissioner for six years.

Hanneman has 30 years of experience in Alaska min-ing and was regional manager for Teck Alaska during the development of the Pogo gold mine, then operated by Teck, and in the resolution of permit issues on the expansion of the Red Dog lead/zinc mine in northwest Alaska, which is operated by Teck.

In one other development, ITH announced Aug. 3 that it closed a $29.6 million private equity placement to fi -nance its continued exploration and development work.

Signifi cantly, the purchasers in the offering include existing institutional investors who are now sharehold-ers but also AngloGold Ashanti (USA) Exploration Inc., an existing shareholder that is also an operator of major mines. Were very pleased that our investors are show-ing continued confi dence in the project, by participating in new rounds of investment, Solie said.

Livengood:Continued from Page 26


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State geologists excited about

results of strategic mineral survey


By Andrew JensenAlaska Journal of Commerce

Speaking geologist is a foreign language to most, but understanding excitement is universal.It is written all over Melanie Werdons face and loud and clear through her voice as she talks about the good old fashioned detective work of Alaska state ge-ologists that led to signifi cant fi ndings of gold and stra-tegic mineral anomalies during 2011 both in William Henry Bay north of Juneau and at the Moran deposit west of Fairbanks.

Werdon is the Mineral Resources Section Chief and economic geologist for the state Division of Geologic and Geophysical Surveys. The division is now engaged in a $3 million program to catalog strategic mineral deposits, which include both the valuable rare earth elements as well as others such as cobalt, platinum and yttrium.

Werdon used old mineral samples collected in the 1970s and 1980s by the U.S. Geologic Survey as a starting point for where to look in the Moran area, and on July 13 the division released its results from 2011 showing new gold bearing drainages and high rare earth element concentrations.

The 2012 program is focusing on prospects near Mo-ran around the Ray Mountains north of Fairbanks. The land is currently held by the U.S. Bureau of Land Man-agement, but is under consideration for the state as it fi nalizes its fi nal 4 million or so acres of land selections.

Gold-bearing results at William Henry Bay pushed the area into top consideration for state selection.

The Ray Mountains area is fairly low on the state pri-orities for selection at present, but if promising results are found this year it will likely move up the list based on its close proximity to the road system.

The $3 million in funding for strategic mineral sur-veys in 2012 was a part of the most recent capital budget approved during the last legislative session and a six-fold increase from the $498,000 allocated last year.

The core shack at the Hotspot rest stop along the Dalton Highway about 2 hours north of Fairbanks is fi lled with the latest technology from GPS mapping tools to something that can only be described as an X-ray gun. Airborne helicopter survey tools have also taken leaps in resolution, providing results that are comparable to the difference between a high-defi nition fl at screen and an old black-and-white set.

But in the end it is still boots-on-the-ground geology work of walking miles per day picking up rock samples and panning sediment from streams to locate potential upland deposits.

The push to develop rare earth and strategic miner-als is an urgent one as China has limited exports and solidifi ed its control of some 95 percent of the global rare earth market.

Rare earths are vital to everything from consumer electronics to military weapons systems, and while the minerals are highly coveted there is a limited market that could be supplied by just a few producing mines.

Alaska is positioned well to meet those needs, and the strategic mineral survey now under way is giving mining companies a strong set of indicators on where to start digging.

PHOTO/AP

State geologist Larry Freeman shows Department of Natural Resources Commissioner Dan Sullivan the location of work around the Ray Mountains north-west of Fairbanks on a visit July 13.


Study: $22M annual savings with energy rebate program

Alaska Journal of Commerce

The University of Alaska Insti-tute of Social and Economic Research has completed a study of the state Home Energy Re-bate Program and estimates the pro-gram is saving households about $22 million annually.

This program by the Alaska Hous-ing Finance Corp. was launched in 2008 to incentivize homeowners on energy effi ciency through rebates.

The state has spent an estimated $110 million between 2008 and 2011 in rebates for new insulation, furnaces and other retrofi ts for approximately 16,500 homeowners. The 2013 fi scal year capital budget allocates $20 mil-lion for the program.

ISERs analysis by economists Scott Goldsmith and Nathan Wiltse and research associate Sohrab Pa-than looks in-depth at the programs effects so far.

Around $185 million was spent on the program in those years with state rebates covering 60 percent and ho-meowners the rest. The authors es-timate many homeowners would not have invested as much without state aid but dont know how much that would have been.

The rebate program accounted for 1,332 jobs from April 2008 to Septem-ber 2011, according to the study.

This is based on every $1 million in new state spending generating seven direct retrofi tting jobs and fi ve indirect ones. Homeowner spending didnt generate additional jobs like state spending.

Alaskan homeowners under the program save an estimated $22 mil-lion annually on heating, an esti-mated 26 percent reduction on those heating bills.

The report states that if that an-nual $22 million is spent locally, it could generate around 240 jobs a year based on a multiplier that $1 million of new household spending generates

11 permanent jobs.As for fuel use, it dropped an esti-

mated 33 percent in houses retrofi t-ted under the rebate program.

This is an annual savings of 1.6 trillion Btus, which is equivalent to around 275,000 barrels of oil.

However, the report states part of this decline may be due to higher en-ergy prices instead of the rebates.

The Home Energy Rebate Program

strives to increase Alaskas energy ef-fi ciency by 15 percent per person by the year 2020.

The authors estimate the rebates have other long-term benefi ts, such as reducing needs to store natural gas in Southcentral.

They state the retrofi tting may also have helped offset the residential con-struction slowdown around the time the program started.

The legislation funded the program as fuel prices shot upwards over the last several years. The issue is a big deal in Fairbanks, where 80 percent of households use fuel oil.

ISER reports that Fairbanks homes make up 14 percent of the rebate pro-gram.

Jim Dodson, president of the Fair-banks Economic Development Corp., said energy costs, such as space heat-ing costs, can be four times as much as in Anchorage.

Dodson said the rebate program is signifi cant but not enough. He said such energy conservation is a good way to save money but will never re-place developing affordable energy.

My belief is that Alaska will never be economically successful until af-fordable energy is distributed across all resources, not just resources in one location, he said.

He said Alaska is an extraction

state that exports resources without adding labor value, which will inhibit development that leads to such en-ergy.

This can contribute to transporta-tion epicenter communities like An-chorage to faring better than others, including rural areas.

What were doing does not make any sense, Dodson said.

Rebates are not the states only measure of working on the Interiors high energy costs.

Gov. Sean Parnell recently told business leaders his administration is working on a liquid natural gas trucking project that could start in 2014.

The other state retrofi t program is the Weatherization Program. The new capital budget allocates $31.5 million for this.

The full analysis is available on the ISER website.

My belief is that Alaska will never be economically successful until affordable

energy is distributed across all resources, not just resources in one location

Jim Dodson, president of the Fairbanks Economic Development Corp.


BLM plans cleanup of one old well, may add others

Parnell signs bills expanding AIDEA finance ability


The U.S. Bureau of Land Man-agement plans to plug and clean debris at one abandoned old exploration well drilled by the gov-ernment in the National Petroleum Reserve-Alaska and may be able to in-clude several other nearby abandoned wells in the project, Alaska BLM offi -cials say.

We are working on cost estimates for the project, at the Iko Bay No. 1 well, and also on a three-year plan we are putting together to work on other abandoned wells, said Bud Cribley, Alaska Director for the BLM.

BLM is being criticized by Alaska U.S. Sen. Lisa Murkowski and Alaska state offi cials over a lax record in cleaning up old wells, many of which are leaking.

This is an embarrassment to the federal government. It is a crime for which the government would fi ne a private company millions of dollars, Murkowski said in a statement.

Murkowski spoke following a Sen-ate Energy and Natural Resources Committee hearing on the legacy well problem. She is the ranking member on the committee.

Of 135 old exploration wells drilled in the NPR-A over several decades by the U.S. Navy and the U.S. Geologi-cal Survey, only 16 have been plugged in accordance with state regulations, Murkowski said.

Alaska Rep. Charisse Millet, R-An-chorage, testifi ed at the Senate hear-ings. Millet sponsored a resolution

passed by the Legislature this spring asking BLM to address the problem.

Cathy Foerster, chair of the Alaska Oil and Gas Conservation Commis-sion, also testifi ed at the Senate hear-ing, saying that the BLM wells are out of compliance with state law and very likely federal law.

The Iko Bay No. 1 well, BLMs cur-rent priority, is leaking gas from a crack in the wellhead, BLM offi cials have ac-knowledged. Foerster said the well has been leaking for years.

We call it the whistling well because of the sounds it makes, she said.

BLM offi cials said they have been hampered by budget constraints. Costs per well for plugging and abandoning have ranged from $2 million to $4 mil-lion per well and BLMs entire annual budget for managing all of NPR-A, which covers 23 million acres of northern Alas-ka, is about $10 million per year.

However, industry offi cials said the agencys cleanup operations have been poorly organized and ineffi cient.

Once mobilization is done and a rig and crew and transported it would make sense to close out several wells in an area. Instead they do one well, usu-ally in response to some emergency. It is terribly expensive to do it that way, said Richard Gerrard, a consulting ge-ologist who manages NPR-A operations for FEX LLC, an independent that has explored in the reserve.

Offi cials with the North Slope Bor-ough, the regional municipality, said they offered to pool resources with the BLM in a program to plug and abandon several old government wells on lands

transferred to the borough. The BLM turned down the offer, according to Ja-son Bergerson, state and federal govern-ment affairs manager for the borough.

The Iko Bay well abandonment will involve setting plugs to meet state reg-ulations set by the state conservation commission Foerster heads, and re-move the wellhead. The operation will likely require a workover rig, BLMs acting chief of communications, K.J. Mushovic, wrote in an email.

Once a rig is brought into the area, other nearby wells may also be closed out. The Iko Bay well is about 20 miles southeast of Barrow in the northern part of NPR-A.

The government explored in NPR-A extensively beginning after World War II but no commercial-scale discoveries were made. It was only in the 1980s that a decision was made to have oil and gas lease sales in the reserve and allow private companies to do explora-tion.

It is only in recent years that com-panies have made discoveries, however, and all of them are modest and are in the northeast part of the NPR-A.

The fi rst commercial production from NPR-A will take place in three years when the CD-5 drill site and bridge across the Colville River are completed by ConocoPhillips and Ana-darko Petroleum.

Once that infrastructure is complete, two other small discoveries further west in NPR-A are likely to be developed.


Alaska Journal of Commerce

Gov. Sean Parnell signed two pieces of legislation June 12 to promote economic development in eco-nomically depressed areas and to facilitate fi nanc-ing for small to medium-sized energy projects in the state.

Both measures expand the ability of the Alaska Indus-trial Development and Export Authority, or AIDEA, to help fi nance projects. AIDEA is the states development fi nance corporation.

One bill Parnell signed was Senate Bill 25, the Alaska Sus-tainable Strategy for Energy Transmission and Supply Act.

Sponsored by state Sen. Lesil McGuire and state Rep. Lance Pruitt, both Anchorage Republicans, the bill establish-es a new fund within AIDEA for fi nancing energy projects.

Under the bill AIDEA will be able to make direct loans to

borrowers for energy projects or participate in loans through banks or credit unions. The authority will also be able to insure project obligations by offering a loan or bond guaran-tee. Examples of possible projects include improving energy effi ciency in commercial buildings and renewable energy de-velopment, Parnell said.

At the bill signing ceremony with the governor, McGuire gave credit to several of her legislative colleagues in helping with the bill, particularly Rep. Lance Pruitt, who led the ef-fort on the bill in the House of Representat

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