The Economic Impacts of Alaska's Mining Industry - Alaska Miners ...

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the state collected $226,191 in payments in lieu of annual labor. Coal Rents and Royalties — The State received $1,475,789 in rents and royalties from coal mining in Alaska in 2004. The standard rate for coal royalties on state lands for new leases is 5 percent of gross value. For coal leases in existence on Juneau 18, 1982, the royalty rate at the next time of adjustment will be five percent of the adjusted gross value. This will allow for certain costs to be deducted. Material Sales — In 2004, the state earned $579,407 from sales of sand, gravel, rip rap, rock, limestone, slate, peat, and any other substances mined from State of Alaska ground that are not applied for through the location (mining claim) system or leasing. Of this amount, $112,047 was paid by Alyeska Pipeline Service Company to the State Pipeline Coordinators Office for use of material along the Trans Alaska Pipeline System corridor. Much of the remaining sales are made in the North Slope region to support North Slope oil exploration and production development. There are three types of materials sales from which the state receives payments: 1) Limited Material Permit, where there is no filing or application fee; 2) “Limited” and small “negotiated” sales where the price charged is set by the Alaska Department of Natural Resources based generally on the fair market sales price of material in the area; 3) “Negotiated” and “competitive” sales where the amount charged for larger material sales (>25,000 cubic feet) is based on a sitespecific appraisal or an abbreviated appraisal. A “competitive” sale price is initially set by an appraisal, but may be raised during an auction if more than one person or company competes for the material. Other State Mining Fees — In 2004, $93,102 was collected in various mining fees. These fees include filing, penalty, bond pool payment, surface mining application, and Annual Placer Mining application fees. Corporate Net Income Tax — In FY 2005, the mining industry paid $242,490 to the State of Alaska in corporate net income tax. All corporations doing business in Alaska must file a tax return. The corporate net income tax payment is a reflection of a corporation’s profitability. The State of Alaska levies a corporate net income tax based on federal taxable income with certain Alaska adjustments. Multi-state corporations apportion income on a “water’s edge” basis using the standard apportionment formula of property, payroll, and sales. Tax rates are graduated from 1 to 9.4 percent in increments of $10,000 of taxable income. The maximum rate (9.4 percent) applies to taxable income of $90,000 and higher. In summary, the mining industry paid approximately $15.8 million in taxes, rents, royalties, and fees to the State of Alaska in 2004. State of Alaska Direct Revenue from Mining, 2004 Amount Paid State mineral rents and royalties Annual claim rentals 2 $2,657,939 Annual labor 5 226,191 Production royalties 162,637 Sub Total $3,046,767 State coal rents and royalties Royalties $1,239,257 Rents 236,532 Sub Total $1,475,789 State material sales Division of Land $467,360 State Pipeline Coordinators Office 112,047 Sub Total $579,407 State mining miscellaneous fees Bond pool payment $35,426 Annual Placer Mining Application fees 27,150 Penalty fees 26,110 Surface coal mining application fee 3,116 Filing fees 1,300 Sub Total $93,102 Mining license payments Mining license 1,3,4 $10,317,238 Income Tax payments Corporate net income tax 1 $242,490 TOTAL $15,754,793 Source: Alaska Department of Natural Resources, Alaska Department of Revenue, Alaska Industrial Development and Export Authority, Alaska Department of Commerce, Community and Economic Development. Special Report 59, Alaska’s Mineral Industry 2004, Division of Geological & Geophysical Surveys/Department of Commerce, Community and Economic Development, October 2005. 1. Fiscal year 2005 figures 2. Includes upland lease and offshore lease rentals. 3. Includes metals, coal, and material. 4. Payments made in FY 2005 have not yet been adjusted for refunds; these refunds will be recorded in FY 2006, and may significantly reduce the totals recorded for FY 2005. 5. Payments in lieu of annual labor The Alaska Railroad is owned by the State of Alaska. In FY 2004, 15 percent of the Alaska Railroad Corporation’s total operating revenue The Economic Impacts of Alaska’s Mining Industry McDowell Group, Inc. • Page 27
were generated by movement of coal and gravel destined for Alaska or export markets. 32 Alaska Railroad Operating Revenues from Mining, FY2001-2004 (Millions) Coal, Local Coal, Export Gravel Total FY2001 $5.0 $3.2 $7.5 $15.8 FY2002 5.4 1.6 7.9 14.9 FY2003 5.9 1.1 9.8 16.8 FY2004 7.3 2.9 6.7 16.9 Source: Alaska Railroad and “Economic Significance of Alaska Railroad,” ISER Publications, December 2004, p. 10. Teck Cominco, as the operator of Red Dog Mine, also pays an annual user fee for use of the stateowned DeLong Mountain Regional Transportation System, the road and port that serve the Red Dog Mine. In FY 2005, Teck Cominco paid $17.7 million in user fees to Alaska Industrial Development and Export Authority (AIDEA). This payment goes to AIDEA’s general fund to repay the bonds issued for construction of the transportation system and provides a return on AIDEA’s equity investment in the port and road. Payments to Local Governments The mining industry paid an estimated $11.1 million to local governments in 2004. There are several ways the mining industry provides direct payment to local governments, including property taxes, sales tax, severances taxes, payments in lieu of taxes (PILTs), and rents or production revenue from rock, sand, and gravel production on local government lands. Property Tax Mining companies represent some of the largest property taxpayers in the City & Borough of Juneau, Fairbanks North Star Borough, and the City of Nome. In 2004: • Fort Knox/True North paid $3.5 million in property taxes to the Fairbanks North Star Borough. This mine is the Borough’s second largest property tax payer. • Greens Creek Mine paid $660,000 in property taxes to the City and Borough of Juneau. The mine is the largest private property tax payer. • Usibelli Coal Mine paid $155,000 in property taxes for its Wishbone Hill property to the 32 Bradford Tuck and Mary Killorin, “Economic Significance of Alaska Railroad,” ISER Publications, December 2004, p. 10. Matanuska-Susitna Borough. It also paid $125,000 in property taxes to the Fairbanks North Star Borough. • Alaska Gold Company paid $53,300 in real property taxes to the City of Nome. Alaska Gold Company was the fourth largest property tax payer in Nome These are direct payments by mines to these local governments. These figures do not include property tax payments made by mine employees. A 1999 study conducted by Information Insights and the McDowell Group for the Fairbanks North Star Borough found that the Fort Knox minerelated workforce paid $500,000 in property taxes. That figure is no doubt higher today as a result of increased assessments and an increase in the mine workforce. Payment in Lieu of Taxes (PILT) Local government payments can also include payment in lieu of taxes (PILT), such as that which is stipulated in an agreement between Teck Cominco (operator of the Red Dog Mine) and the Northwest Arctic Borough. 33 In FY2005, Teck Cominco’s PILT payment to the Borough totaled $6,228,000, and represented 76 percent of the Borough’s total General Fund revenues. 34 Teck Cominco is the Borough’s single most important source of revenue. The borough receives no sales tax or property tax revenues. In November 2005, the City of Delta Junction and Teck-Pogo, Inc. also entered into a PILT agreement. As part of that agreement, Teck-Pogo paid the City of Delta Junction $500,000 in 2005; another $500,000 is to be paid in 2006 and $1,000,000 in 2007, if a Borough has not yet been incorporated. 35 Severance Tax In the Denali Borough, Usibelli Coal Mine pays a severance tax of $0.05 per ton of coal. The Borough also receives other severance tax payments for sand and gravel operations. In 2004, mining companies paid $74,630 in severance taxes to the Denali Borough. 36 33 AS 29.45.030 prohibits the Northwest Arctic Borough to assess a property tax on the value of Teck Cominco’s leasehold interest in the road and port system. 34 Northwest Arctic Borough Finance Department. 35 Section 3, Agreement for Payment in Lieu of Taxes Delta/Teck-Pogo signed October 14, 2005. 36 Figure provided by Usibelli Coal Mine. The Economic Impacts of Alaska’s Mining Industry McDowell Group, Inc. • Page 28
Page 1 and 2: Prepared for the Alaska Miners Asso
Page 3 and 4: TABLE OF CONTENTS Executive Summary
Page 5 and 6: Alaska’s metallic mineral mines r
Page 7 and 8: Because the Fort Knox Mine is a lar
Page 9 and 10: CHAPTER I: PROFILE OF THE MINING IN
Page 11 and 12: development may include stripping o
Page 13 and 14: Exploration Expenditures in Alaska,
Page 15 and 16: Mine Development Investment in Alas
Page 17 and 18: Mining Production Value in Alaska,
Page 19 and 20: more than 500 placer mines statewid
Page 21 and 22: CHAPTER III: EMPLOYMENT AND PAYROLL
Page 23 and 24: Coal Mining Monthly Employment at U
Page 25 and 26: Direct Mine Employment in Alaska, 2
Page 27 and 28: Total Direct and Indirect Employmen
Page 29: CHAPTER IV: OTHER ECONOMIC BENEFITS
Page 33 and 34: Mining Project Usibelli Coal Mine G
Page 35 and 36: • Alaska Department of Commerce,
Page 37 and 38: mine is the largest employer in the

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