Legislature(2015 - 2016)BARNES 124

03/18/2015 01:00 PM House RESOURCES

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Audio Topic
01:02:08 PM Start
01:02:54 PM SJR13
01:31:38 PM Presentation(s): Middle Earth by Calista Corporation and Donlin Gold
02:33:33 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSJR 13(RES) Out of Committee
-- Invited/Public Testimony --
+ Middle Earth Presentation by Calista Corporation TELECONFERENCED
& Donlin Gold
-- Testimony <Invitation Only> --
<Bill Hearing Canceled>
-- Invited/Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         March 18, 2015                                                                                         
                           1:02 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Benjamin Nageak, Co-Chair                                                                                        
Representative David Talerico, Co-Chair                                                                                         
Representative Mike Hawker, Vice Chair                                                                                          
Representative Bob Herron                                                                                                       
Representative Craig Johnson                                                                                                    
Representative Kurt Olson                                                                                                       
Representative Paul Seaton                                                                                                      
Representative Andy Josephson                                                                                                   
Representative Geran Tarr                                                                                                       
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
CS FOR SENATE JOINT RESOLUTION NO. 13(RES)                                                                                      
Supporting oil and  gas exploration and development  on the outer                                                               
continental  shelf offshore  of the  state; opposing  attempts to                                                               
prohibit future oil  and gas development in the  Beaufort and the                                                               
Chukchi  Seas, including  the Hanna  Shoal  area; and  requesting                                                               
that   the  federal   Administration   cease   and  desist   from                                                               
restrictions  that adversely  affect active  or future  leases in                                                               
high petroleum potential areas in  the Beaufort and Chukchi Seas,                                                               
including the Hanna Shoal area.                                                                                                 
     - MOVED CSSJR 13(RES) OUT OF COMMITTEE                                                                                     
PRESENTATION(S):  MIDDLE EARTH BY  CALISTA CORPORATION AND DONLIN                                                               
     - HEARD                                                                                                                    
HOUSE BILL NO. 139                                                                                                              
"An Act  allowing the Alaska Gasline  Development Corporation, or                                                               
a subsidiary of the corporation,  to build, operate, and maintain                                                               
a gas pipeline  within the boundaries of the  Susitna Flats State                                                               
Game Refuge, the Minto Flats  State Game Refuge, the Captain Cook                                                               
State Recreation Area, the Nancy  Lake State Recreation Area, the                                                               
Willow Creek State Recreation Area, and the Denali State Park."                                                                 
     - BILL HEARING CANCELED                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SJR 13                                                                                                                  
SHORT TITLE: OCS OIL & GAS EXPLORATION/DEVELOPMENT                                                                              
SPONSOR(s): SENATOR(s) COGHILL                                                                                                  
02/09/15       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/09/15       (S)       RES                                                                                                    
02/20/15       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/20/15       (S)       -- MEETING CANCELED --                                                                                 
02/23/15       (S)       RES WAIVED PUBLIC HEARING NOTICE,RULE                                                                  
02/23/15       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/23/15       (S)       Moved  CSSJR 13(RES) Out of Committee                                                                  
02/23/15       (S)       MINUTE(RES)                                                                                            
02/25/15       (S)       RES RPT CS  6DP  NEW TITLE                                                                             
02/25/15       (S)       DP:    GIESSEL,    COSTELLO,    COGHILL,                                                               
                         MICCICHE, STEDMAN, STOLTZE                                                                             
03/02/15       (S)       TRANSMITTED TO (H)                                                                                     
03/02/15       (S)       VERSION: CSSJR 13(RES)                                                                                 
03/04/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/04/15       (H)       RES                                                                                                    
03/18/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
CHAD HUTCHISON, Staff                                                                                                           
Senator John Coghill                                                                                                            
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Introduced CSSJR 13(RES) on behalf of the                                                                
sponsor, Senator Coghill.                                                                                                       
KARA MORIARITY, President and CEO                                                                                               
Alaska Oil and Gas Association (AOGA), Anchorage, Alaska                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of SJR 13.                                                                          
MONICA JAMES, Executive Vice President/Chief Operating Officer                                                                  
Calista Corporation                                                                                                             
Anchorage Alaska                                                                                                                
POSITION STATEMENT:  Assisted in providing a PowerPoint                                                                       
presentation entitled "Transportation & Energy Infrastructure                                                                   
Village Cluster Consolidated Services Plan."                                                                                    
GEORGE OWLETUCK, MA, Government Relations Liaison                                                                               
Calista Corporation                                                                                                             
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:     Assisted   in  providing   a  PowerPoint                                                             
presentation  entitled  "Transportation &  Energy  Infrastructure                                                               
Village Cluster Consolidated Services Plan."                                                                                    
JAMES FUEG, Project Study Manager                                                                                               
Donlin Gold Project                                                                                                             
Barrick Gold Corporation                                                                                                        
No address provided                                                                                                             
POSITION STATEMENT:  Provided  a PowerPoint presentation entitled                                                             
"Donlin Gold Project Update".                                                                                                   
CHARLIE COBB, Technical Engineer, Architect                                                                                     
Dam Safety and Construction Unit                                                                                                
Division of Mining, Land and Water                                                                                              
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Answered a  question related to  the Donlin                                                             
Gold Project update.                                                                                                            
ACTION NARRATIVE                                                                                                              
1:02:08 PM                                                                                                                    
CO-CHAIR  BENJAMIN NAGEAK  called  the  House Resources  Standing                                                             
Committee meeting to order at  1:02 p.m.  Representatives Seaton,                                                               
Olson,  Hawker,  Tarr,  Josephson,   Talerico,  and  Nageak  were                                                               
present  at  the  call  to order.    Representatives  Herron  and                                                               
Johnson arrived as the meeting was in progress.                                                                                 
          SJR 13-OCS OIL & GAS EXPLORATION/DEVELOPMENT                                                                      
1:02:54 PM                                                                                                                    
CO-CHAIR NAGEAK announced that the  first order of business is CS                                                               
FOR SENATE JOINT  RESOLUTION NO. 13(RES), Supporting  oil and gas                                                               
exploration  and  development  on  the  outer  continental  shelf                                                               
offshore of the  state; opposing attempts to  prohibit future oil                                                               
and  gas  development  in  the Beaufort  and  the  Chukchi  Seas,                                                               
including the Hanna  Shoal area; and requesting  that the federal                                                               
Administration cease and desist  from restrictions that adversely                                                               
affect active or future leases  in high petroleum potential areas                                                               
in  the Beaufort  and  Chukchi Seas,  including  the Hanna  Shoal                                                               
1:03:25 PM                                                                                                                    
CHAD  HUTCHISON,  Staff,  Senator   John  Coghill,  Alaska  State                                                               
Legislature, introduced  CSSJR 13(RES) on behalf  of the sponsor,                                                               
Senator Coghill.   He explained  the resolution is  in opposition                                                               
to  recent efforts  by the  federal executive  branch to  further                                                               
restrict areas in the Chukchi and  Beaufort seas as it relates to                                                               
oil  and gas  development.   The  specific concern  is the  Hanna                                                               
Shoal  area in  the  Chukchi  Sea.   There  are  some active  and                                                               
adjacent  leases  where it  is  felt  there  will be  a  negative                                                               
effect.   There  is  concern  about the  ability  to renew  those                                                               
active  leases that  are currently  in the  area and  there is  a                                                               
concern  that  some  of  the  mitigation  costs  associated  with                                                               
designating the Hanna Shoal as  an environmentally sensitive area                                                               
will further prohibit oil and gas development in that area.                                                                     
MR. HUTCHISON began a PowerPoint  presentation consisting of maps                                                               
of the area being talked about.   Drawing attention to slide 2, a                                                               
map of  the Beaufort Sea provided  by the Bureau of  Ocean Energy                                                               
Management  (BOEM), he  said the  different colored  boxes denote                                                               
the activity.   Green indicates the historic leases  that the oil                                                               
companies have had  in the past and blue indicates  areas of high                                                               
petroleum potential.   Red indicates federally  restricted areas,                                                               
of  which one  is  a subsistence  area by  Barrow  and another  a                                                               
subsistence area  by Kaktovik.  These  were previously restricted                                                               
by the Bush  Administration and every five  years the restriction                                                               
goes  forward; the  Obama Administration  has continued  the same                                                               
restriction from 2012  to 2017.  Yellow  indicates active leases,                                                               
none of  which are in the  restricted areas.  Moving  to slide 3,                                                               
he  noted  that the  leases  shown  in  green around  Barrow  and                                                               
Kaktovik  are the  historic  leases and  said  the oil  companies                                                               
generally don't  have an ongoing  interest in those.   The active                                                               
leases shown  in yellow are the  ones about which the  sponsor is                                                               
most concerned.  He said slides  4 and 5 provide a less cluttered                                                               
view  of  what  the  proposed  area looks  like  that  the  Obama                                                               
Administration is moving forward with.                                                                                          
1:06:16 PM                                                                                                                    
MR.  HUTCHISON brought  attention to  slide 6,  stating the  real                                                               
concern is  in the Chukchi  Sea, which  has a lot  more activity.                                                               
He said  the blue color  indicates the areas with  high petroleum                                                               
potential.  There are more active  leases as can be seen by there                                                               
being a  lot more areas  depicted in yellow.   The red  line near                                                               
the coast on slide 6 is the  25-mile buffer zone.  The only thing                                                               
existing in  that 25-mile  area are historic  leases that  are no                                                               
longer of  interest to  the producers.   The  pink and  red areas                                                               
near Barrow  indicate the  subsistence area  for Barrow  in which                                                               
there  are  no  active  leases,   so  there  is  not  really  any                                                               
resistance to  that portion of it.   The key area  in the middle,                                                               
the Hanna Shoal area, is indicated  by the yellow circle.  It has                                                               
been studied the previous five  years.  Within that yellow circle                                                               
are historic and active leases as  well as a large area with high                                                               
petroleum potential.   Turning to slide 8 he  explained that this                                                               
area is important because Shell  has three active leases that are                                                               
adjacent  to the  Hanna  Shoal  area.   Repsol  has seven  leases                                                               
actually in the  Hanna Shoal area itself and  another five leases                                                               
in the adjacent area that  deal with similar petroleum prospects.                                                               
The  concern  is that  designating  an  area as  [environmentally                                                               
sensitive]  will  decrease  the  ability to  renew  those  leases                                                               
beyond 2022  and will  increase the mitigation  costs to  the oil                                                               
producers.     Mr.   Hutchison   said  slide   9  shows   further                                                               
clarification as  to what some  of the proposed area  looks like.                                                               
Slide 10 indicates the withdrawn  areas [located within the draft                                                               
proposed   program  area]:     the   25-mile  buffer   area,  the                                                               
subsistence area around  Barrow, and the Hanna  Shoal area, which                                                               
is the new component to all this.                                                                                               
1:09:30 PM                                                                                                                    
CO-CHAIR NAGEAK  said his statement is,  "Here we go again."   He                                                               
     It really  upsets me that  people who live  there, most                                                                    
     of them ...  have been working on this  issue for years                                                                    
     and years and years.   All along the coast working with                                                                    
     the whalers,  working with  the industry,  working with                                                                    
     everybody and  going through the  issue of  reliance on                                                                    
     our resources  offshore and  onshore.   And here  we go                                                                    
     again.   We  have  all this  potential,  but it  really                                                                    
     comes to  us as Native  people and all people  who live                                                                    
     along the  coast where we rely  on renewable resources.                                                                    
     We  also rely  on  nonrenewable resources  for our  tax                                                                    
     base and for our livelihoods.   A lot of people work in                                                                    
     that area....  Without the  oil industry we wouldn't be                                                                    
     who we are today.                                                                                                          
CO-CHAIR NAGEAK  noted that  just a few  weeks ago  the President                                                               
began considering placing  the 1002 Area [in  the Arctic National                                                               
Wildlife Refuge] near where he was  born into a Wilderness.  When                                                               
oil was  discovered it was  found out  that the United  States of                                                               
America had to  do land claims.  While doing  the land claims the                                                               
federal  government  also  created  [Native]  corporations.    He                                                               
     What are corporations?  Well,  they're an instrument to                                                                    
     make  money.    And  why did  the  government  give  us                                                                    
     corporations when  we wanted  tribes?  Well,  they gave                                                                    
     us corporations and they ...  locked up the areas where                                                                    
     our resources  are or our  resources have been.   Since                                                                    
     time  immemorial our  people  used those  resources....                                                                    
     So,  here we  go again.   What  are we  to do  when the                                                                    
     government  of the  United  States  in infinite  wisdom                                                                    
     gave us  an instrument to  say ... "go  enrich yourself                                                                    
     but in the meantime we'll  lock up every piece of land,                                                                    
     every piece of  water ... and you're not  going to have                                                                    
     anything."  That  is exactly what it is right  now.  We                                                                    
     didn't ask  for corporations.   But  then for  the past                                                                    
     several  years this  has been  happening after  working                                                                    
     diligently for  years and years and  years working with                                                                    
     the  industry,  with  the government,  with  everybody.                                                                    
     And so what are we to  do?  There is one federal agency                                                                    
     who's locking  up everything  ... for  those of  us who                                                                    
     depend  on the  resource and  ... another  agency who's                                                                    
     willing to work  with us and finding ways  to make sure                                                                    
     that everything  is protected in  that area  where they                                                                    
     are going to  open up or they have opened  up areas for                                                                    
     oil and gas  exploration.  So we have  two agencies ...                                                                    
     that  have given  us  heartache and  hope  at the  same                                                                    
     time.  So  what are we to  do?  What [are]  a whole lot                                                                    
     of my families  going to do in Kaktovik  when they have                                                                    
     a resource  right underneath their feet  but they can't                                                                    
     use it?                                                                                                                    
1:14:39 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  understood  that in  the  announcement                                                               
referred  to by  the  resolution, the  President also  authorized                                                               
some  exploratory development  in a  very preliminary  stage from                                                               
Virginia down to the South Carolina coast.   He said as far as he                                                               
knows  President Obama  is the  first to  allow that.   He  asked                                                               
whether the sponsor thinks that  these restrictions in the Arctic                                                               
are due to Shell's performance in 2012.                                                                                         
MR.  HUTCHISON replied  that his  personal opinion  is that  from                                                               
[the President's]  perspective it  might be  related to  that, as                                                               
well as related  to an overreaching philosophical  decision as it                                                               
relates to climate change and environmentally sensitive areas.                                                                  
1:16:04 PM                                                                                                                    
CO-CHAIR NAGEAK opened public testimony.                                                                                        
1:16:23 PM                                                                                                                    
KARA   MORIARITY,  President   and  CEO,   Alaska  Oil   and  Gas                                                               
Association (AOGA),  Anchorage, Alaska,  spoke in support  of SJR
13.   She said the Alaska  Oil and Gas Association  (AOGA) is the                                                               
professional trade  association for the  oil and gas  industry in                                                               
Alaska and its  members represent the majority  of the producers,                                                               
explorers, refiners, marketing,  and transportation activities in                                                               
the state.  The association's  members have been operating in the                                                               
Arctic for  more than 40 years.   Oil and gas  development is the                                                               
backbone  of Alaska's  economy,  and as  the largest  undeveloped                                                               
energy  basin in  the  U.S. the  Arctic  Outer Continental  Shelf                                                               
(OCS)  is the  next generation  of energy  security for  the U.S.                                                               
The Arctic  OCS holds enormous  oil and gas  resources, estimated                                                               
by  the  Department  of  Interior  at  approximately  27  billion                                                               
barrels of  oil and 132 trillion  cubic feet of natural  gas.  In                                                               
comparison, the  Trans-Alaska Pipeline System (TAPS)  has carried                                                               
more than  17 billion barrels  in just over  30 years.   So, TAPS                                                               
has  played a  critical  link in  the  nation's energy  security,                                                               
transporting crude  oil from Alaska's  North Slope to  West Coast                                                               
markets.   The OCS development  in the Beaufort and  Chukchi seas                                                               
could feed  into TAPS  and maintain its  viability for  many more                                                               
years to come.   Oil and gas development in  the Arctic OCS means                                                               
more jobs for Alaskans.   Development of the Chukchi and Beaufort                                                               
seas is predicted  to produce an annual average  of 35,000 direct                                                               
and  indirect  jobs representing  a  total  payroll of  over  $70                                                               
MS. MORIARITY noted  that since 1971, 84 wells  have been drilled                                                               
in the  Arctic OCS,  all without incident.   Industry  has worked                                                               
with   communities  to   incorporate  traditional   knowledge  in                                                               
decision  making, establish  Conflict  Avoidance Agreements,  and                                                               
impose  seasonal  drilling  limitations.    New  regulations  and                                                               
further  research  has  further   ensured  that  development  and                                                               
environmental  protection  can  co-exist.     Three  AOGA  member                                                               
companies  hold leases  within the  withdrawn  areas or  directly                                                               
adjacent to  it.   While the  federal withdrawal  language states                                                               
that  "nothing  in  this  withdrawal  affects  the  rights  under                                                               
existing leases  in the  withdrawn areas,"  there are  still many                                                               
unknowns for the  operators, such as the ability  to renew active                                                               
leases or how the transport  or building of infrastructure into a                                                               
pipeline  would  be  affected.     The  prior  four  lease  sales                                                               
scheduled in the  Beaufort and Chukchi seas were  included in the                                                               
Bureau of  Ocean Energy  Management's previous  five-year leasing                                                               
plan,  but were  withdrawn  and  subsequently not  held.   It  is                                                               
AOGA's  fear that  additional restrictions  or delays  will limit                                                               
the opportunities for development in the Arctic OCS.                                                                            
MS. MORIARITY  said that  as the  sea ice  stays open  longer and                                                               
other countries move forward with  exploration and development in                                                               
their waters  and transportation  through the  ice-free Northwest                                                               
Passage, Alaska's  arctic seas could be  left largely unattended.                                                               
With little  infrastructure in  place communities  along Alaska's                                                               
north  coast will  be at  the greatest  risk with  no ability  to                                                               
respond.   Development  of  the Arctic  OCS  for exploration  and                                                               
development  would  bring that  infrastructure  to  a very  rural                                                               
onshore area and the industry's  continued presence would provide                                                               
security and  response capabilities should  they be needed.   She                                                               
said  AOGA  supports SJR  13  to  maintain  all of  the  proposed                                                               
leasing  areas in  the Beaufort  and Chukchi  seas and  to resist                                                               
additional restrictions on leasing in the final program.                                                                        
1:20:46 PM                                                                                                                    
CO-CHAIR  NAGEAK closed  public testimony  after ascertaining  no                                                               
one else wished to testify.                                                                                                     
1:21:18 PM                                                                                                                    
REPRESENTATIVE   TARR  stated   she   has   concerns  about   the                                                               
resolution.   Four of  the five  areas withdrawn  were previously                                                               
withdrawn so there  has been a history under  both Democratic and                                                               
Republican administrations  to exclude those areas  from leasing.                                                               
She  understood from  what she  has read  that the  new area  was                                                               
picked for  its biological importance,  the subsistence  needs of                                                               
the people living  nearby, and to ensure that  the marine animals                                                               
and endangered whales swimming through  those areas are protected                                                               
and  will be  there  for future  generations.   She  said she  is                                                               
cautious because the  revenue issue has not yet  been resolved so                                                               
the state  doesn't stand to  gain much from this  OCS development                                                               
and  she would  like to  see this  matter resolved  before moving                                                               
1:22:44 PM                                                                                                                    
CO-CHAIR NAGEAK  reiterated that  this issue  has been  worked on                                                               
for  a very  long time  and studies  have been  done.   The North                                                               
Slope  Borough has  a diploma  wildlife management  and he  was a                                                               
drafter for many years of that  diploma.  He has been in offshore                                                               
and onshore issues  for more than half his life.   He has watched                                                               
all of this happening.  His  first job right after high school in                                                               
1969 was  in Prudhoe Bay, so  he has been involved  in oil issues                                                               
for  a very  long  time  and in  working  with  the industry  and                                                               
others.   So it is  upsetting when things  like this happen.   In                                                               
the  late 1980s  and early  1990s  a look  was taken  at how  the                                                               
offshore rigs  would work and  there was  a rig right  outside of                                                               
Barrow.   This  rig was  put in  the area  where the  Chukchi and                                                               
Beaufort  seas meet,  which  is a  very volatile  area.   In  the                                                               
summer he has  been near it many times while  hunting.  He shared                                                               
his experience  of being right  in front of Barrow  while hunting                                                               
and  seeing all  kinds of  animals  when suddenly  the ice  began                                                               
coming in  very fast.  The  community knows how that  area is and                                                               
how  dangerous it  is and  this has  been told  to everybody  who                                                               
comes up  to do work  in that area.   Discussions about  what the                                                               
administration wants to do will  be continued in his community as                                                               
well as in this committee                                                                                                       
1:26:34 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON stated  he will not be  objecting to the                                                               
CO-CHAIR TALERICO  offered his appreciation of  Co-Chair Nageak's                                                               
input on this  issue because it is rare for  the committee to get                                                               
actual  firsthand  knowledge  and  experience  from  someone  who                                                               
thoroughly knows the area.                                                                                                      
1:27:17 PM                                                                                                                    
CO-CHAIR TALERICO moved to report  CSSJR 13(RES) out of committee                                                               
with  individual  recommendations  and  the  accompanying  [zero]                                                               
fiscal  note.    There  being no  objection,  CSSJR  13(RES)  was                                                               
reported from the House Resources Standing Committee.                                                                           
The committee took an at-ease from 1:28 p.m. to 1:31 p.m.                                                                       
^PRESENTATION(S):    Middle  Earth  by  Calista  Corporation  and                                                               
Donlin Gold                                                                                                                     
      Middle Earth by Calista Corporation and Donlin Gold                                                                   
1:31:38 PM                                                                                                                    
CO-CHAIR NAGEAK  announced that  the next  order of  business are                                                               
presentations  by the  Calista Corporation  and  the Donlin  Gold                                                               
1:32:16 PM                                                                                                                    
MONICA JAMES,  Executive Vice President/Chief  Operating Officer,                                                               
Calista  Corporation, introduced  herself  and her  co-presenter,                                                               
noting  that she  and  Mr.  Owletuck are  Yup'ik  Eskimo and  are                                                               
original Calista shareholders.   She said she  is originally from                                                               
Alakanuk  but grew  up in  Bethel and  Mr. Owletuck  is from  the                                                               
village of Marshall.                                                                                                            
The committee took a brief at-ease.                                                                                             
MS. JAMES  stated that  the remote  Calista region  is accessible                                                               
only by plane  or boat and the region has  the highest population                                                               
of remote Alaskans.  It  is Alaska's most economically challenged                                                               
region with 27 percent of  all residents living below the federal                                                               
poverty level.  Many of the  region's residents pay upwards of 58                                                               
percent of their annual income  on energy-related costs.  Despite                                                               
these statistics,  the people are resilient  and culturally rich,                                                               
having  thrived   in  a   challenging  environment   with  little                                                               
infrastructure  and incorporating  their traditional  subsistence                                                               
lifestyle.   She said today's presentation  will demonstrate that                                                               
even  in the  face of  these  contemporary realities  of lack  of                                                               
infrastructure  and  crippling  energy costs,  achievements  have                                                               
been  made as  a region  with what  the region  has.   That said,                                                               
there  are opportunities  to continue  increasing these  triumphs                                                               
through development of public  facility infrastructure which will                                                               
empower the  ability to sustain  the region's villages.   Natural                                                               
resources  have  been  developed  in the  fishing  industry  with                                                               
little  to no  infrastructure  to  support it.    The region  has                                                               
natural  resources for  potential development  and by  partnering                                                               
with  the  State of  Alaska  and  the federal  government,  sound                                                               
investments  to address  the  energy crisis  in  the region  will                                                               
support  the sustainability  of people  and will  foster economic                                                               
development for  all Alaskans  living in  the Calista  region who                                                               
want  employment  opportunities  to  create  industry  to  change                                                               
socio-economic disadvantages.                                                                                                   
1:35:34 PM                                                                                                                    
GEORGE  OWLETUCK,  MA,   Government  Relations  Liaison,  Calista                                                               
Corporation, turned  to slide  2 to explain  that people  rely on                                                               
transportation  and   energy  to  achieve  economic   growth  and                                                               
sustainability.   For example, history shows  America's towns had                                                               
many booms  and busts.   Towns can  come and go  if unsustainable                                                               
and  2,700 disappeared  over the  last 100  years, mostly  in the                                                               
southwest U.S.   Alaska has this history too.   From the 1800s to                                                               
the  mid-1900s,   Alaska  packers  ruled  the   salmon  industry,                                                               
providing 80  percent of  territory tax  revenue, but  37 cannery                                                               
towns are now  gone.  The baby  state of Alaska has  had 22 towns                                                               
and villages  disappear since the  1900s.  Which towns  in Alaska                                                               
survived  the  best?   Ketchikan  has  repeatedly  survived  many                                                               
difficult times by using available  resources and adapting.  From                                                               
salmon processing  in the 1880s,  mining until the  1950s, salmon                                                               
and  halibut cold  storage in  the 1930s,  the forestry  industry                                                               
from  the 1950s  to the  late 1990s,  tourism in  the 1980s,  and                                                               
seafood and  mining recently, the  stabilizing factors  have been                                                               
transportation and  affordable energy.   Hydropower in  1903 made                                                               
Ketchikan affordable  and competitive.   Today Ketchikan  has one                                                               
of   the  highest   state  resident   per  capita   incomes  from                                                               
transportation accessibility,  stable and affordable  energy, and                                                               
natural  resource extraction  for jobs  and economy.   These  are                                                               
what  people  rely  on  in  Southwest  Alaska  and  the  region's                                                               
projects are related  to transportation.  There is  a request for                                                               
$1.4 million  for road design,  engineering, and permits  for the                                                               
Pilcher  Mountain Project  at  Marshall and  a  request for  $7.5                                                               
million for  the Emmonak  Dock Project  that would  contribute to                                                               
expanded economic  opportunity.   Both are part  of a  50 percent                                                               
federal and state matched funding request as seed capital.                                                                      
1:38:05 PM                                                                                                                    
MS. JAMES  addressed slide  3, pointing out  that as  federal and                                                               
state  budgets tighten,  communities  with little  infrastructure                                                               
struggle.   The Calista  region lacks  infrastructure, yet  it is                                                               
still  being  developed.   At  57,000  square miles  the  Calista                                                               
region  is relative  in  size to  the state  of  Oregon, but  has                                                               
little  infrastructure  and the  highest  cost  of living.    The                                                               
region has 27,735  residents with 56 communities  ranging in size                                                               
from 200 to  6,100 and a growing young population.   There are no                                                               
interconnecting roads  and no transmission grids,  which prevents                                                               
cost sharing of  assets.  Drawing attention to  the map depicting                                                               
all  of the  communities in  the Calista  region, she  noted that                                                               
nearly  all of  the communities  have a  school for  kindergarten                                                               
through twelfth  grade, but  there is only  one true  high school                                                               
which is in Bethel.  This  tends to lead to low graduation rates,                                                               
low  scores, many  dropouts.    Often there  is  poor quality  of                                                               
education and  high teacher  turnover.   Teachers don't  have the                                                               
ability  to build  home  equity  when they  are  teaching in  the                                                               
villages.   The  state graduation  rate  is 65  percent, but  the                                                               
Lower  Yukon  School  District and  the  Lower  Kuskokwim  School                                                               
District  have  graduation  rates  of  43.81  percent  and  42.75                                                               
percent, respectively.   The teacher turnover rate is  high at 30                                                               
percent.   Many  of the  56  villages have  an independent  aging                                                               
diesel generation system  for village power.   Most villages have                                                               
a runway;  for example,  Marshall's runway is  100 feet  wide and                                                               
3,200 feet long  and can support small aircraft.   The region has                                                               
a couple of hub airports with  runways in Aniak and Saint Mary's.                                                               
Most  of  the 56  villages  have  health  clinics, but  there  is                                                               
limited  access  to  state troopers  and  village  public  safety                                                               
officers even though there is a high need for public safety.                                                                    
MR.  OWLETUCK continued  addressing slide  3, noting  the average                                                               
cost of heating fuel in  the Yukon-Kuskokwim Delta (Y-K Delta) is                                                               
$6.38 as  compared to the  on-road system average cost  of $3.41.                                                               
Gasoline in the  Y-K Delta is $6.90 compared to  $3.42 in the on-                                                               
road system.  According to  statistics from the Alaska Department                                                               
of  Fish  &  Game  (ADF&G),  85  percent  of  households  harvest                                                               
subsistence  resources and  70 percent  of  those households  are                                                               
sharing  their  catch, with  a  total  estimate of  over  954,000                                                               
pounds a year that is harvested to feed families and friends.                                                                   
1:41:35 PM                                                                                                                    
MS. JAMES moved to slide 4, stating  that a port is needed in the                                                               
Lower  [Yukon] Region.   There  is no  regional port  in the  700                                                               
miles between Bethel and Nome.   There is an inter-portal linkage                                                               
that  connects economically  with the  Nenana and  Fairbanks rail                                                               
and  highway  with the  port  in  Anchorage.   For  example,  the                                                               
village  of Marshall  shipped housing  material from  Seattle via                                                               
Fairbanks using Nenana barges.                                                                                                  
MR.  OWLETUCK said  the Native  village of  Marshall, which  is a                                                               
tribe, used  money from the  U.S. Bureau of Indian  Affairs (BIA)                                                               
housing improvement program to build  25 homes that were given to                                                               
the elders.  The most  cost-efficient means to transport material                                                               
from  Tacoma  WA is  to  go  from  Washington to  Anchorage,  use                                                               
competitive trucking to go up  the highway to Fairbanks, and hire                                                               
local Nenana  barges to ship  the material down the  Yukon River.                                                               
So, there  is an inter-modal  linkage from  Anchorage, Fairbanks,                                                               
and  the Lower  Yukon  River  that can  be  capitalized upon  for                                                               
future projects.                                                                                                                
MS.   JAMES   continued   addressing  slide   4,   noting   that,                                                               
geographically, the  Calista region is divided  between the Yukon                                                               
River, the Kuskokwim River, and  coastal areas.  Politically, the                                                               
region is divided into the  House of Representatives districts of                                                               
Dillingham, Nome,  and Bethel.  Administratively,  the Department                                                               
of Transportation  & Public  Facilities divides  the area  into a                                                               
northern region and a central  region.  The Fourth Judicial Court                                                               
in Fairbanks oversees the region.                                                                                               
MR.  OWLETUCK stated  it is  important to  note that  the Emmonak                                                               
Lower  Yukon  port  will  provide  infrastructure  for  potential                                                               
offshore oil and gas development from Middle Earth and shipping.                                                                
MS. JAMES drew  attention to Emmonak's location on the  map as it                                                               
relates  to the  future  development of  Arctic shipping,  saying                                                               
that the  Emmonak dock  can serve as  an emergency  response plan                                                               
because the region must be  prepared to address potential hazards                                                               
with future shipping through the Arctic.                                                                                        
MR. OWLETUCK added  that in regard to using the  Emmonak port for                                                               
potential offshore  oil and gas  development, a U.S.  Coast Guard                                                               
approved  company in  Argentina  has been  identified that  could                                                               
provide modular liquefied natural gas  (LNG) plants at a fraction                                                               
of the cost  of an LNG plant.   So, potentially, if  there is oil                                                               
and gas  development off the  Lower Yukon, the Emmonak  port will                                                               
have an  infrastructure than  can be  capitalized upon  to export                                                               
gas to the region and up river to the Nenana/Fairbanks area.                                                                    
1:44:37 PM                                                                                                                    
MS.  JAMES brought  attention  to slide  5,  explaining that  the                                                               
bright  green  on  the  map  denotes  the  area  and  communities                                                               
serviced by  the port of Emmonak.   The proposed dock  in Emmonak                                                               
would  help  make  freight shipping  more  economical  for  these                                                               
communities.  The  port in Emmonak would facilitate  the safe and                                                               
efficient offloading of cargo from  barges.  Currently, there are                                                               
challenges of  overcrowding, erosion,  and flooding.   If nothing                                                               
is done, riverbank  erosion and flooding will persist  and pose a                                                               
significant  threat to  the existing  physical infrastructure  of                                                               
local   maritime  industry   businesses.     Supporting  economic                                                               
diversity and stability  in the Emmonak dock  results in maritime                                                               
industry  growth and  expansion,  which develops  a more  diverse                                                               
economic base.                                                                                                                  
MR. OWLETUCK  stated the  total cost for  the Emmonak  Project is                                                               
$17.2 million and it is permitted  and shovel ready.  The City of                                                               
Emmonak received  $500,000 in  2009 from a  state grant  for port                                                               
design.   In 2011 the U.S.  Army Corps of Engineers  approved the                                                               
port design.   In 2012 the City of Emmonak  received a $3 million                                                               
fiscal  year 2013  general obligation  bond,  which will  deliver                                                               
rock by October  2015 from Nome, Saint Mary's, and  Stevens.  The                                                               
request for  Phase 1 for the  Emmonak Project is $7.5  million of                                                               
the remaining balance of $14 million,  which goes back to a 50/50                                                               
state match.   Calista  is going  to Washington  DC next  week to                                                               
propose the  same message of  having federal assistance  to match                                                               
state  assistance,  which  will  also  be  part  of  the  private                                                               
investment in the region.                                                                                                       
1:46:44 PM                                                                                                                    
MS.  JAMES  discussed  slide  6,   stating  that  an  example  of                                                               
community   sustainability   is   the   Yukon   Delta   Fisheries                                                               
Development Association.  Despite the  lack of a port facility in                                                               
Emmonak  the  Yukon  Delta  Fisheries  Development  Association's                                                               
maritime   industry  businesses   have  demonstrated   sufficient                                                               
growth.    These  businesses establish  Emmonak  as  an  economic                                                               
center  for   the  region,  providing  employment,   income,  and                                                               
services to residents throughout the Lower Yukon.                                                                               
MR. OWLETUCK  said Yukon Delta Fisheries  Development Association                                                               
has  several   subsidiaries  that  are  part   of  the  Community                                                               
Development Quota (CDQ)  Program.   Kwik'pak  Fisheries from 2002                                                               
to 2013 bought 21 million  pounds of salmon, infusing $21 million                                                               
in cash  directly to 451  fishermen.  In 2014  Kwik'pak Fisheries                                                               
paid  over  $50  million  in aggregate  wages  to  region  works.                                                               
Kwik'pak's  youth employment  program provides  summer employment                                                               
to youth aged 14-17 and has paid  over $1 million to youth in the                                                               
last  four years.    Since 1999  Yukon  Marine Manufacturing  has                                                               
manufactured,  built, and  sold  243 20-24  foot  skiffs.   Yukon                                                               
Marine Manufacturing  employs local  welders to build  and repair                                                               
boats for area  residents.  Yukon River Towing  built a bunkhouse                                                               
in  Emmonak  that  sleeps  30   people  using  siding  from  logs                                                               
delivered by local  residents and milled at a local  sawmill.  At                                                               
its local sawmill  Yukon River Towing manufactures  lumber out of                                                               
the  logs  brought down  the  Yukon  River to  build  bunkhouses,                                                               
homes,  and has  developed a  log  and stick-frame  home kit  for                                                               
Lower Yukon  residents.   Yukon River Towing  is using  a program                                                               
offered by the  U.S. Department of Housing  and Urban Development                                                               
that offers low interest mortgage loans for home buyers.                                                                        
1:48:55 PM                                                                                                                    
MS. JAMES moved to slide 7  and stated that the Marshall dock and                                                               
quarry   road   would    complement   community   sustainability.                                                               
Currently,  the Lower  Yukon Region  must purchase  material from                                                               
Nome  at exorbitant  cost.   Constructing  a  quarry in  Marshall                                                               
would  result in  reducing  public cost  by  $20-$24 million  for                                                               
airport projects  identified by the Department  of Transportation                                                               
& Public Facilities  (DOT&PF).  Savings are  also anticipated for                                                               
future regional  infrastructure with local high-grade  gravel and                                                               
armour  rock at  a  significantly  lower cost.    This quarry  at                                                               
Pilcher Mountain has a 25-year  life for producing material.  The                                                               
Native  village of  Marshall identifies  Indian Reservation  Road                                                               
Funds as a 10 percent federal  match.  The location of the quarry                                                               
also  reduces hazards  of offloading  freight  and heavy  vehicle                                                               
materials  on the  unimproved, eroding  shoreline  landing.   For                                                               
public  safety,  this plan  separates  heavy  equipment from  the                                                               
local foot traffic.                                                                                                             
MR. OWLETUCK  related that  in a letter  to Calista  the Northern                                                               
Region of DOT&PF  identified several projects for  which it wants                                                               
to use Pilcher Mountain rock.   Those projects are rehabilitation                                                               
of 15 miles  of the Saint Mary's and Mountain  Village road at an                                                               
estimated cost  of $13 million,  relocation of the  Pilot Station                                                               
airport and construction of a new  airport and new 3-mile road at                                                               
an estimated cost  of $10-$20 million, improvements  to the Saint                                                               
Mary's runway  at an  estimated cost of  $10-$20 million,  and an                                                               
extension of  the runway  at Nunam Iqua  (Sheldon's Point)  at an                                                               
estimated  cost of  $2.5-$5 million.   The  high cost  of barging                                                               
rock between Nome and the Lower  Yukon projects makes the rock at                                                               
Pilcher Mountain of  high interest to DOT&PF.   He drew attention                                                               
to the topographic  map on slide 7 depicting  the proposed 3-mile                                                               
road between  the proposed  dock site and  Pilcher Mountain.   He                                                               
pointed  out  that the  white  spot  in  the picture  of  Pilcher                                                               
Mountain  is an  existing  quarry.   He  further  noted that  the                                                               
topographical map depicts  an existing road from  Marshall to the                                                               
top of Pilcher Mountain where there is cell tower.                                                                              
MS.  JAMES said  another important  point about  the location  of                                                               
this dock  is its  location inside  a natural  river eddy.   Over                                                               
time and annual breakup, this location would protect the dock.                                                                  
MS. JAMES  turned to  slide 8,  saying there  is a  consensus for                                                               
village cluster  consolidated services  to develop a  more robust                                                               
energy  transportation  infrastructure  for Western  Alaska  that                                                               
consolidates  public  services  and  infrastructure  support  for                                                               
community sustainability.   The Calista  region is a  good model:                                                               
it has  many small  villages that  lack basic  infrastructure, so                                                               
doing a cluster approach would work in this region.                                                                             
1:52:36 PM                                                                                                                    
MR.  OWLETUCK shared  an anecdote,  explaining that  many of  the                                                               
region's people  are graduates  of boarding schools.   He  is the                                                               
graduate of a Jesuit boarding  school at Saint Mary's Mission and                                                               
his older sister is a graduate  of four years of boarding school.                                                               
Last summer his  80-year-old father said something  was lost when                                                               
boarding schools were lost.  When  a high school was put in every                                                               
village the quality  of education was lost  that boarding schools                                                               
used to  provide.  He related  that his nephew and  nieces are in                                                               
high school in  a boarding school at a Galena.   The young people                                                               
are voting  with their feet  by going to boarding  school because                                                               
they recognize  the quality of  education that a  boarding school                                                               
potentially can provide.   Part of the solution to  the high cost                                                               
of living in  the Calista region is to  build infrastructure that                                                               
would  serve  those  communities  located  in  a  cluster.    For                                                               
example, a 15-mile  road has connected Saint  Mary's and Mountain                                                               
Village since the  early 1980s, and a 6,000-foot  runway at Saint                                                               
Mary's used  to land Mark  Air jets in  the early 1980s.   Rather                                                               
than building a high school in  every little village at a cost of                                                               
$30 million each, a regional high  school could be built to serve                                                               
the cluster communities.   Roads could be built  to connect those                                                               
cluster  villages  and to  bus  kids  to  the high  schools;  for                                                               
example, the Anchorage School District  buses kids from Girdwood,                                                               
which is 30  miles away.  Regional high  schools, middle schools,                                                               
or elementary  schools would allow  focus on a higher  quality of                                                               
education with specialists.  Statistics show  that 6 out of 10 of                                                               
the region's high school students  do not graduate and a regional                                                               
school  is a  potential  solution.   This  is  also  part of  the                                                               
proposal  to address  high energy  costs.   There  could be  sub-                                                               
regional,  gas-powered power  plants that  serve the  surrounding                                                               
communities with high voltage/high wattage interties.                                                                           
MS.  JAMES highlighted  the successful  program  of the  Chininik                                                               
Wind Group, which  established four wind turbines  in the village                                                               
cluster  comprised of  Tuntutuliak, Kongiganak,  Kwigilingok, and                                                               
Kipnuk.  Each of the four  communities has wind turbines that are                                                               
connected  and for  each community  there has  been a  30 percent                                                               
displacement  of the  fuel costs  of the  power plants  and a  30                                                               
percent  displacement  of  fuel  costs  in  the  homes  that  are                                                               
participating in this project.                                                                                                  
1:56:23 PM                                                                                                                    
MR. OWLETUCK  brought attention to  slide 9 to discuss  the state                                                               
and  local benefits  of  village  cluster consolidated  services.                                                               
State  benefits  would  include reducing  duplication,  achieving                                                               
economies  of scale  to lower  costs,  coordinating state  agency                                                               
master plans,  sharing of  resources, centralizing  and bettering                                                               
of schools,  and leveraging limited  state capital  and operating                                                               
funds.   Local  benefits would  include linked  communities, more                                                               
reliable power,  cheaper energy and transportation  costs, higher                                                               
quality  services, improved  education  for  rural students,  and                                                               
improved emergency services and resources.                                                                                      
MS.  JAMES addressed  the map  on page  9, pointing  out a  well-                                                               
traveled trail  to Toksook Bay,  as well  as a trail  to Tununak.                                                               
She noted that  these trails are used in winter  and could become                                                               
a road system for this cluster of communities.                                                                                  
1:57:38 PM                                                                                                                    
MS. JAMES moved  to slide 10, stating that the  Donlin Creek Mine                                                               
affords access  to energy.   A 315-mile-long  pipeline, privately                                                               
financed at  $1 billion, is  being proposed to  transport natural                                                               
gas from the Beluga natural gas  pipeline system 30 miles west of                                                               
Anchorage to the Donlin Creek  Mine.  Completing the gas pipeline                                                               
project  provides  a future  opportunity  for  a federal,  state,                                                               
public, and private  partnership to expand a  natural gas powered                                                               
electric intertie  network into the  region.  This  has potential                                                               
to  expand  the  natural  gas  pipeline  into  the  region,  thus                                                               
reducing reliance  on subsidized electricity from  the power cost                                                               
equalization.  She said Calista  is optimistic to have the Donlin                                                               
Creek Mine move forward.   The infrastructure resulting from this                                                               
development could  potentially aid in reducing  the energy crisis                                                               
the region currently  faces.  The Marshall dock  and quarry would                                                               
provide reduced public  costs for the rock material  to the Lower                                                               
Yukon projects.   She  asked for the  committee's support  of the                                                               
request of  $1.34 million for  the road design,  engineering, and                                                               
permits.  The Emmonak dock  has possibilities of future expansion                                                               
for  business  development  activities  which  potentially  could                                                               
include support  of offshore oil  and gas and  Arctic development                                                               
if the  $7.5 million request  can be funded  collaboratively with                                                               
the State of Alaska and the federal government.                                                                                 
1:59:26 PM                                                                                                                    
REPRESENTATIVE TARR  understood the  $1.4 million  would complete                                                               
the  [Pilcher Mountain]  Project.   She  calculated that  roughly                                                               
$6.2 million is  left for funding the [Emmonak  Dock] Project and                                                               
surmised  this   funding  would   be  coming  from   the  federal                                                               
MR.  OWLETUCK replied  correct,  the original  project was  about                                                               
$14.2  [million]  and that  was  from  several  years ago.    The                                                               
engineers have  come back to the  City of Emmonak which  has come                                                               
to Calista Corporation  and added some inflation for  the cost of                                                               
material, services, and  energy.  These are  therefore the latest                                                               
numbers.  There is a balance of  about $13.8 million.  Phase 1 in                                                               
its  entirety will  cost $7.5  million, which  leaves about  $6.9                                                               
million as the remaining balance.                                                                                               
2:00:52 PM                                                                                                                    
REPRESENTATIVE  HERRON commented  that he  has watched  Ms. James                                                               
and Mr. Owletuck  grow up over and become leaders  in the Calista                                                               
organization.    He  said  what they  have  demonstrated  to  the                                                               
committee  is that  he represents  a district  of 32  communities                                                               
that  have to  stand  alone  as compared  to  Anchorage that  has                                                               
multiple legislative  members representing one  common community.                                                               
He  offered  his  appreciation to  the  Calista  Corporation  for                                                               
showing  the challenges  that  he faces  as  a representative  in                                                               
Western Alaska.                                                                                                                 
2:01:41 PM                                                                                                                    
REPRESENTATIVE  TARR observed  that  the median  income is  about                                                               
$46,000 and the income of the  451 fishermen is about $46,000 per                                                               
fisherman.  She asked where this median income comes from.                                                                      
MR. OWLETUCK  responded Emmonak  is unique  in that  it is  a CDQ                                                               
community, so  it has a fleet  of offshore trawlers that  is able                                                               
to underwrite the  cost of purchasing commercial  salmon from the                                                               
commercial fishermen  in the  Lower Yukon.   Therefore  the wages                                                               
paid to the region's residents  and the amount paid for ex-vessel                                                               
value of  the salmon  harvested commercially  is an  anomaly, the                                                               
rest  of the  region is  mired in  poverty because  of a  lack of                                                               
resource   development   due  to   lack   of   access  to   cheap                                                               
transportation  in turn  due  to  lack of  access  or ability  to                                                               
produce cheap  energy.  The  percentages are U.S. Census  data as                                                               
an aggregate average  of over 25,000 people, but  the numbers for                                                               
Emmonak and  that region are  skewed due  to access to  the trawl                                                               
industry  and  they  skew  the   average  higher  than  it  would                                                               
otherwise be.                                                                                                                   
The committee took an at-ease from 2:03 p.m. to 2:05 p.m.                                                                       
2:05:27 PM                                                                                                                    
CO-CHAIR NAGEAK  directed the committee's  attention to  the next                                                               
presentation by the Donlin Gold Project.                                                                                        
JAMES FUEG,  Project Study Manager, Donlin  Gold Project, Barrick                                                               
Gold  Corporation, provided  a  PowerPoint presentation  entitled                                                               
"Donlin Gold  Project Update".   Turning to slide 2  he explained                                                               
that  Donlin Gold  LLC is  the operating  company for  the Donlin                                                               
Gold Project.   Donlin Gold LLC is jointly owned  by Barrick Gold                                                               
Corporation,  the world's  largest gold  mining corporation,  and                                                               
NOVAGOLD  RESOURCES INC.   Donlin  Gold  operates in  partnership                                                               
with  Calista Corporation  with  whom Donlin  Gold  has a  mining                                                               
lease agreement.   The deposit  itself is located on  lands owned                                                               
by Calista and  The Kuskokwim Corporation (TKC).   The lands were                                                               
selected  several decades  ago for  their mineral  potential.   A                                                               
separate surface  use agreement  with TKC allows  for the  use of                                                               
the lands.   Together with its partners Donlin  Gold is committed                                                               
to  advice  in  the  Donlin  Project  in  coordination  with  the                                                               
stakeholders  in the  region  in  an environmentally  responsible                                                               
manner to bring benefits to everyone in the partnership.                                                                        
2:07:02 PM                                                                                                                    
MR. FUEG  displayed a  map on  slide 3 and  pointed out  that the                                                               
deposit  is located  about 270  miles  west of  Anchorage and  10                                                               
miles  north of  the closest  community to  the project,  Crooked                                                               
Creek on the Kuskokwim  River.  Seen on the map  is that there is                                                               
a  complete  lack of  infrastructure  between  Anchorage and  the                                                               
Railbelt and  the project site.   Should the project  move ahead,                                                               
Donlin will propose  to build and operate  all the infrastructure                                                               
needed   to  support   the  project   through  construction   and                                                               
MR. FUEG  reviewed the site  layout shown on slide  4, explaining                                                               
it shows  what the project might  look like after about  25 years                                                               
of operation.   It would  be a large open  pit mine with  a waste                                                               
rock  storage facility,  and a  tailings storage  facility.   The                                                               
mill  would  be located  on  the  ridge  between the  waste  rock                                                               
storage  and the  tailings storage  facilities.   The deposit  is                                                               
large with some  33 million ounces in the reserve,  placing it in                                                               
the top fraction  of undeveloped gold projects  around the world.                                                               
That reserve  would support  a mine  life of  more than  27 years                                                               
with an  annual production  of more  than a  million ounces.   If                                                               
developed it would be one of  the few mines around the world that                                                               
actually produces more than a  million ounces annually.  The open                                                               
pit operation  would move more  than 400,000  tons of rock  a day                                                               
and the  mill itself would process  some 60,000 tons of  rock per                                                               
day.   Power would be  generated onsite  using a gas  fired power                                                               
plant with a pipeline from Cook Inlet to supply the gas.                                                                        
2:08:57 PM                                                                                                                    
MR. FUEG  described the  tailings facility  (slide 5),  saying it                                                               
would  be a  state-of-the-art engineered  tailings facility.   It                                                               
would be a  rock filled dam similar  to the one at  the Fort Knox                                                               
mine outside  of Fairbanks.   The rock filled dam  abutment would                                                               
be constructed  using the  downstream construction  method, which                                                               
is the  most robust and  sound method of construction  similar to                                                               
that  used  for water  retention  dams  around  the world.    The                                                               
overburden would be excavated down  to the bedrock before placing                                                               
the rock  fill and the  dam wall.  This  would also be  the first                                                               
tailings  facility  built in  Alaska  with  a complete  synthetic                                                               
liner to cover  the full basin of the  tailings storage facility,                                                               
thereby   protecting   the   groundwater  and   other   resources                                                               
underneath the tailings  storage facility.  The liner  would be a                                                               
low-density  polyethylene  similar  to that  used  in  industrial                                                               
waste  facilities throughout  the  country.   Over  the years  of                                                               
developing  and  engineering  the  project,  numerous  subsurface                                                               
investigations have been conducted  in the tailings dam footprint                                                               
to better understand the geotechnical  conditions.  This includes                                                               
some 41 core drill holes.   Many were drilled with chilled fluids                                                               
so when the core is brought back  to the surface the ice and clay                                                               
layers  within   those  cores  remains   intact  to   provide  an                                                               
understanding  of the  geotechnical  conditions.   Some 37  auger                                                               
holes  were drilled,  about 60  test  pits were  dug, 18  seismic                                                               
surveys were  conducted, and  4 resistivity lines  were run.   As                                                               
the   design    advances   through   detailed    design   towards                                                               
construction, additional onsite  investigations and drilling will                                                               
be  conducted to  fully identify  the subsurface  conditions that                                                               
have the potential to impact the design and construction.                                                                       
2:10:54 PM                                                                                                                    
MR.  FUEG discussed  the map  on slide  6, explaining  that since                                                               
there is no existing infrastructure  in the area, Donlin proposes                                                               
to build all  the infrastructure needed to  construct and operate                                                               
the project.  This would include  a 30-mile road from a port site                                                               
to  be constructed  on  the  Kuskokwim River  near  the mouth  of                                                               
Jungjuk Creek, a  5,000 foot runway, a 600 man  permanent camp to                                                               
support the project during operations,  and a 2,500 man temporary                                                               
camp to support  the project during construction.   Together with                                                               
its  partners, Donlin  Gold would  also propose  to build  a port                                                               
site specific for  the project at the community of  Bethel on the                                                               
downriver side  of the Kuskokwim.   Additionally, there  would be                                                               
the 315-mile-long gas  pipeline that Donlin Gold  is proposing to                                                               
build from Cook Inlet.                                                                                                          
MR. FUEG addressed  the logistic and supply chain  as depicted on                                                               
slide 7, noting that during  operations the project would require                                                               
some  100,000  tons  annually of  consumables,  including  mining                                                               
consumables  such  as  truck  tires, as  well  as  30-40  million                                                               
gallons of  fuel annually  to power  the mobile  fleet associated                                                               
with the mine.   The anticipation is to  supply these consumables                                                               
and fuel  directly from the  West Coast.  Consumables  would come                                                               
via line-hold  barge out of  the West Coast, most  likely Seattle                                                               
or  Tacoma, into  Bethel.   Fuel would  either by  transported by                                                               
tanker  to  Dutch Harbor  and  then  by  a line-hold  barge  into                                                               
Bethel, or  possibly direct  from the West  Coast into  Bethel on                                                               
line-hold barges.   In Bethel  the fuel and consumables  would be                                                               
transferred to shallow-draft  river barges for the  185 mile trip                                                               
up the  river to the  port site at  Jungjuk and then  onto trucks                                                               
for transport to the  mine site.  There would be  a tank farm and                                                               
storage areas  large enough  to hold all  the supplies  needed to                                                               
operate through the winter season when the river is frozen.                                                                     
MR. FUEG provided further details  regarding the proposed natural                                                               
gas pipeline  (slide 8).   The 315-mile-long pipeline would  be a                                                               
buried, 14-inch  steel pipeline carrying  gas from the  west side                                                               
of Cook Inlet  near Beluga to the mine site.   The pipeline would                                                               
use  a single  compressor  station located  near  Beluga and  its                                                               
current configuration would  be able move about  70 million cubic                                                               
feet of  gas per day.   At this  point it is  anticipated needing                                                               
between 30 and  35 million cubic feet  of gas a day  to power the                                                               
mine site.   The average running  load at the mine  site would be                                                               
around 150 megawatts, an amount  similar to what the community of                                                               
Fairbanks  uses.    The  pipeline   would  be  constructed  using                                                               
temporary   infrastructure   that   would  be   reclaimed   after                                                               
development.  It would be an  open access pipeline, most likely a                                                               
contract  carrier, which  is a  requirement  of the  right-of-way                                                               
leases from  both the state  and federal governments  whose lands                                                               
would be  crossed to  build the  pipeline.  While  this is  a lot                                                               
smaller  than  some  of the  pipeline  projects  currently  being                                                               
considered  in the  state,  it  is by  itself  a challenging  and                                                               
expensive project.                                                                                                              
2:14:17 PM                                                                                                                    
MR.  FUEG  turned  to  slide 9,  reporting  that  the  permitting                                                               
process for  the Donlin  Gold Mine  began in  July 2012  when the                                                               
initial  federal permit  applications  were filed  with the  U.S.                                                               
Army Corps  of Engineers (Corps).   The Corps is the  lead agency                                                               
for  the  environmental impact  statement  (EIS)  for the  Donlin                                                               
Project.   The  project  currently being  permitted includes  the                                                               
315-mile-long  gas   pipeline,  the  mine  site   facilities  and                                                               
operations,  and the  infrastructure previously  described.   The                                                               
schedule shown on slide 9 is a  schedule put out by the Corps and                                                               
represents the current  view of when the EIS  would be completed,                                                               
which  right now  looks like  a Record  of Decision  (ROD) coming                                                               
sometime in  2017.  A  draft EIS will  go out for  public comment                                                               
later this year.  He  thanked the Department of Natural Resources                                                               
(DNR), the  Department of  Environmental Conservation  (DEC), and                                                               
other  Alaska state  agencies for  their role  in the  permitting                                                               
process and  their efforts  to keep the  permitting on  track and                                                               
MR.  FUEG reviewed  the EIS  public scoping  meetings (slide  10)                                                               
that have been held.   He said Donlin has been  in the region for                                                               
20 years  and through  that time  Donlin has  been known  for its                                                               
high level  of stakeholder engagement  and consultation.   Donlin                                                               
has been supportive  of that process continuing  through the EIS.                                                               
He explained that slide 10 shows  the process that the Corps used                                                               
in doing the scoping for the  Donlin EIS.  The Corps conducted 13                                                               
scoping  meetings  looking  for  local  input  and  testimony  at                                                               
various locations around  the project site, one  in Anchorage and                                                               
in  twelve  communities  located   in  Western  Alaska.    Donlin                                                               
facilitated  transportation   from  all  the   surrounding  spoke                                                               
communities  into  the  central  hubs  where  the  meetings  were                                                               
conducted,  thereby  allowing  residents of  every  community  to                                                               
participate in  the scoping  process and  give testimony  as they                                                               
desired.  Donlin  believes this is one of  the most comprehensive                                                               
scoping processes ever conducted for an EIS.                                                                                    
2:16:34 PM                                                                                                                    
MR.  FUEG moved  to slide  11  to further  discuss the  community                                                               
engagement.  With its long  history of partnership and engagement                                                               
with  the communities,  Donlin considers  itself as  part of  the                                                               
family  of Southwestern  Alaska and  continues to  remain engaged                                                               
with  the communities  as the  project moves  through permitting.                                                               
Donlin maintains  staffed year-round offices in  Bethel and Aniak                                                               
and conducts 25-30 village meetings  per year.  Donlin has fluent                                                               
Yup'ik  speakers on  staff and  the villages  can choose  to have                                                               
presentations provided in  either English or Yup'ik.    Materials                                                               
such as  brochures are also  provided in Yup'ik and  Donlin staff                                                               
has developed  a Yup'ik glossary  of mining terms to  help people                                                               
understand the  technology being  proposed for  use at  the site.                                                               
Donlin  has a  long reputation  for  local hire  on the  project.                                                               
Since  field   activities  are   limited  while   moving  through                                                               
permitting,  folks  from   Donlin's  workforce  development  have                                                               
developed a school outreach and a  lot of time is now being spent                                                               
in outreach  to middle  and high school  students trying  to help                                                               
them  prepare for  the jobs  that would  become available  if the                                                               
project moves  ahead.  Donlin  has an active  scholarship program                                                               
that  supports students  in  the region  both  for technical  and                                                               
university  level  education.     Donlin's  community  investment                                                               
program   focuses   on   cultural   preservation,   environmental                                                               
protection,  community wellness,  and  education.   Donlin  looks                                                               
forward  to continuing  its partnership  with the  communities of                                                               
the region as the project moves forward.                                                                                        
MR. FUEG concluded  by reviewing the economic  benefits listed on                                                               
slide  12.   During  construction  the  peak workforce  would  be                                                               
around 3,000 people,  resulting in a direct payroll  of some $375                                                               
million per year over the 3-4  years of construction.  During the                                                               
more than 27  years of operations the average  workforce would be                                                               
around 900 people  with a direct annual payroll  of $100 million.                                                               
Indirect and induced  payroll would be about $60  million a year,                                                               
which Donlin  believes could have  many positive impacts  for the                                                               
region.   In addition  to wages,  significant royalties  would be                                                               
going  to partners  Calista and  TKC,  with many  of these  being                                                               
further distributed  throughout the  entire state under  the 7(i)                                                               
and 7(j)  provisions of the  Alaska Native Claims  Settlement Act                                                               
(ANCSA).   Additionally,  the project  would  pay mining  license                                                               
taxes and corporate income taxes to the State of Alaska.                                                                        
2:19:49 PM                                                                                                                    
REPRESENTATIVE  JOHNSON   requested  Mr.  Fueg  to   explain  the                                                               
difference between the tailings dam  being proposed by the Donlin                                                               
Gold Project  and the dam  that recently failed in  Canada [Mount                                                               
Polley dam, British Columbia].                                                                                                  
MR.  FUEG  qualified  he  is not  a  geotechnical  engineer,  but                                                               
replied that there  are substantial differences.   The Donlin dam                                                               
would  be 100  percent rock  filled and  he understands  that the                                                               
[Mount  Polley] dam  was not.   The  [Mount Polley]  dam was  not                                                               
constructed using the downstream  construction method and instead                                                               
utilized a process  whereby the tailings actually  become part of                                                               
the dam wall, which is not what  Donlin is proposing to do.  Most                                                               
importantly,  Donlin  has  spent almost  two  decades  collecting                                                               
climate  data in  the  area and  has  accessed previous  decades'                                                               
worth  of  climate  data  from  government  stations  around  the                                                               
region,  allowing the  production of  various accurate  models of                                                               
the  climatic  conditions,  rainfall, and  water  flows  expected                                                               
through  the project  area.   Using that  information Donlin  has                                                               
built in more than redundant  capacity to deal with water inflows                                                               
into the tailings facility and into  the project area.  Donlin is                                                               
also looking  at state-of-the-art  treatment for  water discharge                                                               
from  the site.   Doing  that avoids  what was  one of  the major                                                               
causes  of the  problems in  British Columbia  where the  dam was                                                               
actually overfilled with water that  it wasn't designed to retain                                                               
and Donlin is not proposing to do that.                                                                                         
2:21:33 PM                                                                                                                    
CHARLIE  COBB,  Technical  Engineer, Architect,  Dam  Safety  and                                                               
Construction   Unit,  Division   of  Mining,   Land  and   Water,                                                               
Department  of  Natural  Resources (DNR),  responded  further  to                                                               
Representative Johnson's  question, noting there are  some pretty                                                               
significant differences between the  Donlin Project and the Mount                                                               
Polley Project other  than the design of the dam  itself.  One of                                                               
the  main  problems  at  Mount  Polley was  the  failure  of  the                                                               
engineers to  understand the foundation  conditions in  that dam.                                                               
There was  an unconsolidated deposit  of glacier silts  and sands                                                               
in the  foundation that actually led  to the failure of  that dam                                                               
and there were  some construction issues in that the  dam was not                                                               
completed  per  the  design.    The issue  is  not  so  much  the                                                               
difference  between  the  dams  as  it  is  the  failure  of  the                                                               
engineers to understand  the site conditions of  the Mount Polley                                                               
Project.  Given Donlin's commitment  to the research necessary to                                                               
understand  the project  setting, DNR  is pretty  confident there                                                               
will not be a repeat of something similar to Mount Polley.                                                                      
REPRESENTATIVE JOHNSON  stated he knew  the answer when  he asked                                                               
the question,  but said  he wanted the  difference to  be pointed                                                               
out because of  campaigns against the Donlin  Project using Mount                                                               
Polley as an example.                                                                                                           
2:23:39 PM                                                                                                                    
REPRESENTATIVE HERRON disclosed  that he and Mr.  Fueg have known                                                               
each other  for many years and  that the dam would  be located in                                                               
his  election   district.     He  inquired   what  some   of  the                                                               
possibilities  are  in  the  region  for  the  excess  generating                                                               
capacity of the plant that will be powered by gas.                                                                              
MR. FUEG  answered there  wouldn't so  much be  excess generating                                                               
capacity  with the  plant,  but there  would  be excess  capacity                                                               
within the  pipeline.  It would  be an open access  pipeline and,                                                               
as such, would  be available to any third  party, whether private                                                               
or  government,  to tap  into  that  pipeline  for gas  to  power                                                               
REPRESENTATIVE  HERRON noted  that  the Donlin  Gold Project  has                                                               
been  flying under  the radar  compared to  the [proposed  Pebble                                                               
Creek] mine.   He  requested Mr. Fueg  to address  the difference                                                               
between the two mines.                                                                                                          
MR.  FUEG replied  he  hesitates to  comment  on the  differences                                                               
because  he is  not an  expert on  the other  mine.   However, he                                                               
thinks one of the big factors  that have led to Donlin's level of                                                               
advancement in permitting is its  long history of cooperation and                                                               
engagement  with  its  partners and  individual  communities  and                                                               
individual people.  He said he  doesn't think there is any person                                                               
in the  villages in  the Calista  region or up  on the  Yukon who                                                               
hasn't either  worked at Donlin or  has a family member  or knows                                                               
somebody who  has worked  at Donlin.   That long  partner history                                                               
during the 20 years of development  is the reason Donlin has been                                                               
able to move forward.                                                                                                           
2:26:08 PM                                                                                                                    
REPRESENTATIVE HAWKER offered his wishes  for the best of success                                                               
with the Donlin Project, saying it  is important to the future of                                                               
the region and the future of  the state.  He inquired whether the                                                               
mine project has a committed source of gas for its pipeline.                                                                    
MR. FUEG responded that at this  point Donlin does not know.  The                                                               
project is currently advancing through  permitting.  The partners                                                               
have committed  to take the  project through permitting  but have                                                               
not yet made a commitment to  construction of the project.  As is                                                               
common in large  projects like this, the partners  are waiting to                                                               
see how the  permitting ends up before making  final decisions on                                                               
commitment  and that  would be  the  point at  which the  project                                                               
would start looking for hard commitments on gas.                                                                                
REPRESENTATIVE  HAWKER noted  that the  actual mining  activities                                                               
are heavily  regulated and involve  a great deal with  both state                                                               
and federal permitting processes.   He asked whether the proposed                                                               
natural  gas pipeline  entails any  public  regulatory agency  or                                                               
public regulatory oversight or  permitting separate from Donlin's                                                               
activities   involved  in   actually   permitting  the   resource                                                               
MR.  FUEG answered  the pipeline  itself, the  mine, and  all the                                                               
associated infrastructure  are covered under a  single permitting                                                               
process as a single EIS.   There will be a single wetlands permit                                                               
for the  entire project.   The various components of  the project                                                               
will  have   various  individual   permits  from   the  regulated                                                               
perspective.   It  will be  an open  access pipeline,  a contract                                                               
carrier, and as such will be regulated by the state.                                                                            
REPRESENTATIVE HAWKER  understood the  EIS schedule  presented by                                                               
Mr. Fueg [slide  9] is one EIS for the  entire project, including                                                               
resource development and the gas pipeline development.                                                                          
MR. FUEG replied correct.                                                                                                       
REPRESENTATIVE HAWKER  further understood that Mr.  Fueg believes                                                               
the regulatory  authority over this particular  pipeline would be                                                               
state regulatory  authority through the Regulatory  Commission of                                                               
Alaska (RCA).                                                                                                                   
MR. FUEG responded correct.                                                                                                     
2:28:34 PM                                                                                                                    
REPRESENTATIVE TARR  commented that  the distinction  between the                                                               
Donlin Project's tailings pond and  the [Pebble Mine] is that the                                                               
[Pebble Mine's]  proposed tailings  pond is  designed to  be like                                                               
Mount Polley,  the one that  failed.  A presentation  last summer                                                               
reviewed  the  three  different   tailings  pond  options,  which                                                               
provided a higher  level of confidence in  the safety surrounding                                                               
the Donlin Project.                                                                                                             
2:29:26 PM                                                                                                                    
REPRESENTATIVE SEATON recalled the state  having to take over the                                                               
Illinois Creek Mine due to  its bankruptcy and pollution problems                                                               
and there  was not enough  bonding but  enough gold was  left and                                                               
recovered to pay  the costs.  Given the Donlin  Project is not on                                                               
state  land,   he  inquired  whether  there   are  still  bonding                                                               
requirements in case of possible events.                                                                                        
MR. FUEG answered that the  state bonding requirements on private                                                               
land  are  the same  as  they  are on  state  land.   Before  any                                                               
construction  can begin  Donlin must  have approval  of both  its                                                               
reclamation and  closure plan  and the  bond or  bonds associated                                                               
with  that  closure  plan.    Donlin  is  looking  at  a  bonding                                                               
instrument both  for the  immediate physical  closure activities,                                                               
which would be  in the order of hundreds of  millions of dollars,                                                               
and  a  further  instrument  for  covering  any  long-term  costs                                                               
associated with  the closure,  such as water  treatment.   So, it                                                               
will  be fully  bonded.   The  state process  requires that  that                                                               
closure plan  and the associated  bond be updated on  a five-year                                                               
basis as the project moves through operations and construction.                                                                 
2:31:11 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON asked whether  NOVAGOLD and Barrick Gold                                                               
have other  projects in Alaska  and what their big  projects have                                                               
been in Canada.                                                                                                                 
MR. FUEG  replied NOVAGOLD  is a junior  mining company  and does                                                               
not own and  operate any other projects, although  it is involved                                                               
in the development of another  project in British Columbia called                                                               
Galore Creek, which is currently  in the pre-feasibility study of                                                               
engineering.   Barrick Gold  is the  world's largest  gold mining                                                               
corporation.  The  company was recently slimmed  down from owning                                                               
something like  27 mines around the  world to about 20.   Barrick                                                               
Gold owns  and operates  many of  the large  mines in  Nevada and                                                               
most of  Barrick Gold's core  assets are  located in Nevada.   He                                                               
believed Barrick  Gold operates  one, or  possibly two,  mines in                                                               
REPRESENTATIVE  JOSEPHSON inquired  whether one  of the  mines on                                                               
the  Seward Peninsula  near  Nome  was owned  by  Nova Copper  or                                                               
NOVAGOLD and  further inquired whether  there was  any connection                                                               
between the two.                                                                                                                
MR. FUEG responded  it was NOVAGOLD, but said  that operation has                                                               
been closed  down.   It was  permitted and  operated for  a brief                                                               
while and  then closed down  a few years  back.  He  believed the                                                               
property was  sold, but  said he doesn't  know whether  the state                                                               
has yet released the bond.                                                                                                      
2:33:33 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 2:33 p.m.