I guess I’d like to wax poetic about the economics of the Pebble Mine project that is being proposed. We had a full presentation on the subject last year, and it’s an often read headline in Alaska news. My concern is the tax structure, as it currently exits, for the state to get a share of what is taken out of the ground. I know that currently whether the mine actually happens or not is still being debated, but in my experience with that much money to be made, desire for money will outweigh any environmental issues and the mine will happen.
Currently with Alaska oil, the tax structure is more of a royalty than a tax, the oil companies basically pay the state 35% (or more under the current plan and prices). This amount is not reducible by claiming expenses like an income tax. The current mining tax of 3% is indeed an income tax. Under the current structure, as I understand it, if the mining companies had expenses to deduct, probably anywhere in the world, they could claim the deductions and reduce the tax paid to Alaska. Under this structure, I can see Alaska getting a big whopping zero from Pebble mine in taxes. As an example, Exxon Corp paid zero in taxes in the US last year even with billions in income in the US. For us Alaskans to get our share, the structure needs to be changed.
Changing the structure just for Pebble however, can’t be done. Under the Alaska constitution the law needs to be fair and equitable for all. If we increased the payout to a higher royalty, then the smaller operators would be unfairly hurt. The economic question as I see it is, how does the state of Alaska ensure that this giant corporation pays its fair share to the state?
I would like to get back to the environmental aspect of allowing the mine to proceed in Alaska. I grew up in Butte Montana, and I lived for years next to piles of mine waste. Some of these piles of slag have been there for 130 years now, and still no weeds or plants grow in this dirt. It is toxic and radioactive. The waste water that now fills the pit has a Ph so low, that if birds land in the water, they never take off again because it kills them to fast. Butte was the largest Super Fund site in the US for about 15 years, attempting to clean up all the waste left from a hundred years of mining. The net result of all the studies was, the mess is too big and too expensive to clean up. I feel it’s much more economically viable to ensure up front that the environment is protected than to impose that cost on our children in the future.
Pat Murphy
You make several good points Pat, and this is indeed such a hot issue in the state right now that I feel compelled to respond.
ReplyDeleteAs we have learned, Alaska now, as in the past, owes it's economic sustainability to the on-going discovery of bonanza resources. The Pebble deposit is indeed one of these. That being the case, there will be intense pressure from many powerful fronts to develop it, as has proven true time and time again. From furs and whaling all the way up through oil and gas, history has shown that if a resource is of bonanza proportions it will ultimately be developed / ravaged / decimated....... choose your metaphor. In this case, however, I have a sense that perhaps history will not bear out the same end result.
Indeed many will object to the current tax structure as you have suggested, for it will be lamented from the highest mountain tops that our resources are being plundered and our environment destroyed for a pittance and a song. Of course there are always clever ways of changing, disguising, or manipulating a tax, as beaurocrats have so brilliantly (?) demonstrated over the millenia. That being a foregone truth, I don't see the issue of unequitable taxes as the last nail in the coffin of this project - what I do see is fish.
What many in the world today equate with Alaska, what they think of first when the name is even spoken, is fish, of salmon in particular. I believe also that the vast majority of our own citizens would believe the same to be true. Fishing, whether it be commercial, pleasure, or subsistance related, has been the backbone, indeed the very essence, of our state's history and culture for as far back as humans have lived here. There have been a great number of politically polarizing issues in Alaska over the decades, but through them all the hew and cry of "don't mess with the fish," has risen above the din. That's not to say that we've always gotten it right, from the fish's perspective, but it has been a most powerful mantra; ie, persuasive tool, over the years. In the case of Pebble, and of whether or not it will ultimately be developed, my gut feeling is that the fish will win this one.
I'm sorry, and I believe I can speak for the fish when I say this, but you don't just build one of the world's largest ever gold mines right smack in the middle of the world's largest and most productive salmon spawning drainage systems! No matter the vastness of the bonanza or it's ultimate worth, whether that be to the developers or to the state, the opportunity cost on this one is just too great. Shall we plunder a resource just to watch as it is carted away, along with the profits, to some faraway place where dwelleth the invisible hand, while at the same time potentially decimating the most valuable and sustainable resource we have? Sure, you'll create a few jobs in the process, and perhaps a few bucks for the state, but at what cost? Once the hole is dry and the the corporations depart to other lands and opportunities, what's left for us? A big hole in the ground, toxic tailing ponds the size of an entire lower 48 state, and not a salmon left to be found in all of southwest Alaska?
Is it worth it? I wonder what Jack London would have to say........
Tony Schmidt