MINING
Socioeconomic
Effects of Mining
The industry’s resilience supports local communities amid the pandemic
By Isaac Stone Simonelli
T

he mining industry and the positive socioeconomic impact it has on local communities statewide managed to remain steady in the face of the world’s ongoing pandemic.

There were 28,900 fewer jobs in Alaska in October 2020 than the previous year; however, COVID-19 resulted in relatively little change in mining employment, according to Dan Robinson, a chief researcher at the Alaska Department of Labor and Workforce Development.

‘An Economic Development Director’s Dream’
In 2019, the mining industry employed 4,600 people directly and 4,800 people indirectly, according to a McKinley Research Group (formerly McDowell Group) report commissioned by the Alaska Miners Association.

As an officially recognized critical infrastructure industry, mining companies’ rapid roll out of COVID-19 safety protocols and a strong market for precious and base metals played a significant role in the sector’s ability to continue to employ Alaskans, injecting much-needed capital into local economies during the pandemic.

Mining projects at various stages of development in the state primarily bolster local economies through employment (direct and indirect), taxes, and local development funds.

Though at a state level employment and especially tax revenue from mining is much smaller than from the oil and gas industry, its impact on the state and especially on local economies is significant, Robinson says.

“A mine is an economic development director’s dream project. A mine is labor intensive, so they bring lots of jobs—hundreds of year-round jobs. They’re high paying jobs,” says Jim Calvin, a senior consultant with McKinley Research Group.

“Mines are typically capital intensive, which means that they can be the source of very substantial property tax revenues for communities in the area. And, in fact, in Juneau, the two mines are the two largest property taxpayers in the community.”

Hecla’s Greens Creek Mine is the largest property tax-payer in Juneau, says Mike Satre, the mine’s government and community relations manager. The next largest is Coeur Mining’s Kensington gold mine.

About 200 of Hecla’s 440 employees live in Juneau full-time, increasing the economic impact of the mine as they buy property, pay taxes, and spend their hard-earned money within the state capital.

Beyond providing direct employment to miners in the community during the pandemic, as well as helping mining vendors keep their doors open, Hecla Greens Creek Mine has propped up some businesses reliant on the city’s tourism industry.

“We were expecting 1.4 million cruise ship visitors,” Satre says. “This year, we effectively got zero. The visitor industry has been devastated here.”

But increased production costs associated with COVID-19 safety protocols have led to an increase in spending in local communities, Satre says.

For example, the strict hotel and catering quarantine protocols Hecla put in place are helping keep some hotels booked up with mine employees in lieu of tourists.

The company is also using transportation companies that would normally be shuttling visitors around the city to move mine employees from the hotel to the mining ship and the airport for shift changes, again finding a way to meet COVID-19 protocols while injecting money into the local economy.

“There’s lots of individuals, lots of jobs that were preserved because we were able to keep operating as a critical infrastructure industry,” Satre says.

Even without the increase in spending in the community due to the pandemic, Satre says the company spends $50 million to $60 million annually with local providers.

Investing Locally
The mine’s investment in the community goes beyond dollars paid in wages and dollars spent.

“What we do is make significant investments in training qualified workforce and making sure that we have the resources in Alaska to build that qualified workforce,” Satre says, noting that the company has invested more than $1 million in direct and indirect contributions to the Center for Mine Training at UAS.

“We’ve created some long-term employees out of that program,” Satre says.

The company also invested in the Delta Mine Training Center and created scholarships for UAF’s Mine Engineering Program. Such investments make it possible for Alaska mining companies to hire Alaskans for key positions rather than headhunting in the Lower 48, Satre says.

Robinson agrees that part of the economic benefit of having a mine in a community are the ways that the companies and their employees participate in the community.

“To the extent mine workers live locally, they make an important contribution to the local economy because wages are especially high,” Robinson says. “Nonprofit giving and contributions to training programs that teach mining-related skills are other ways the economic footprint of mines expands throughout a community.”

While the significant economic impact of the Hecla Greens Creek Mine is mostly localized, the Red Dog Mine in Northwest Alaska sees money disbursed throughout the state.

Per ANCSA, 70 percent of the profits NANA Regional Corporation (which leases the mineral rights of the Red Dog Mine to Teck Alaska Incorporated) earns from the project are distributed to other Native corporations through the 7(i) payments system.

From 2015 to 2018, 70 percent of those 7(i) payments from NANA were from Red Dog Mine, explains NANA Vice President of Natural Resources Lance Miller. Since the mine’s inception in 1989 through 2019, it has generated $1.4 billion for 7(i), which has benefited the entire state, Miller says.

Though those payments are significant, as with most mines in the state, the real impact is on the local level. It was the Red Dog Mine that led to the development of the Northwest Arctic Borough, Miller says.

“The borough was actually developed deliberately in concert with Red Dog, because that could be a tax base for bonding to build schools in the NANA region,” Miller says. “So what mining does in the case of Northwest, it has created a borough, and that’s led to self-governance of the region.”

Miller explains that as the state continues to wade through its financial woes, the mining industry takes on a role of increased importance at the community level as regions potentially need to be more self-reliant.

Mining’s Impact
Red Dog represents more than 90 percent of the borough’s revenue and income, says NANA Vice President of Lands Liz Cravalho.

“Red Dog Mine is the most important source of borough revenue, which receives no other property or sales tax,” according to the 2019 Northwest Arctic Borough Comprehensive Economic Development Strategy from McKinley Research Group.

“So basically, all of those services that the borough provides, including providing a contribution to the school district, are impacted by that,” Cravalho says.

Working with NANA, the Red Dog Mine supports the Village Improvement Fund, which allows local communities to have more control over local infrastructure and program development.

Since 2016, $35 million has been put in the fund. In 2019, a little more than $7 million was approved by Village Improvement Fund Commissioners and the Northwest Arctic Borough Assembly for projects, according to the 2019 Village Improvement Fund Annual Report.

Village projects ranged from energy efficiency measures put in place in Ambler to landfill cleanup in Noorvik and an Iñupiaq language program in Kotzebue.

“There’s a real concerted effort both by the borough and Red Dog [NANA and Teck] to see direct investment in local communities,” Cravalho says.

NANA’s earnings from Red Dog royalties and the agreement with Teck provide jobs, opportunities for dividends, and community investment through NANA’s Village Economic Investment Program and community contributions.

As with mines in other parts of the state, Red Dog Mine also creates direct and indirect jobs in nearby communities, providing a necessary inflow of cash to support subsistence living practices, Cravalho explains.

“For subsistence nowadays, they need cash, they need the ability to buy the gear and equipment to do it safely,” Cravalho says.

About 26 percent of the region’s population works in the mining industry: more than 3,000 NANA shareholders have been employed at one time or another by Red Dog Mine.

In 2020, Teck Red Dog Operations employed 519 regular full-time personnel, says Laura Kayuqtuq Orenga de Gaffory, a spokesperson for Teck Alaska. Nearly 80 percent of those employed are Alaska residents, with 54 percent being NANA shareholders.

“The 1982 agreement provides hiring preference for NANA shareholders and set a goal for shareholder employment of 100 percent. The intent of this goal was to set a high target that requires Teck, with NANA’s assistance, to recruit and train shareholders,” Orenga de Gaffory says.

“As part of this effort, a provision was established for a training and employment plan to be developed in conjunction with the Red Dog Management Committee. Red Dog also has a hiring preference for local communities within the Northwest Arctic and has employees from ten of the eleven communities in the area.”

“I think it’s also important to remember that usually someone who is earning a wage is providing income that supports a larger household,” Cravalho says. “We have about three to four generations per household in our region.”

Responsible Development
Because of Alaska’s blended economy, particularly in the Northwest, it’s important to develop resources in a way that is responsive and supportive of subsistence, Cravalho says.

This balance pairs well with an increased emphasis by investors and large companies on the three pillars of sustainable development: environmental, social, and corporate governance, Miller says.

Northern Star focuses on similar ideas when outlining the company’s commitment to the communities impacted by the Pogo Mine.

“Northern Star is committed to delivering socioeconomic returns to the communities in which we operate, and this commitment is directly reflected in our sustainability vision: delivering responsible environmental and social business practices that lead to both the creation of strong economic returns for our shareholders and shared value for our stakeholders,” says Wendie MacNaughton, an external affairs officer with Pogo mine.

The mine is one of the largest employers in the Interior, with Alaskans from twenty-two communities comprising 57 percent of its workforce, MacNaughton says.

The 515 direct jobs created by the mine resulted in more than $80 million in wages last year.

“While Northern Star prioritizes the hiring of Alaskans in the first instance, the resources labor market is highly competitive, and Pogo is somewhat unique as a ‘fly in fly out’ operation,” MacNaughton says.

“We encourage and incentivize employees to relocate from the Lower 48 states to Alaska, which fortunately isn’t too difficult as Pogo is located in a beautiful state with vast opportunities for lifestyle and adventure.”

The company spent more than $198 million on goods and services with Alaska businesses in 2020, providing hundreds of indirect jobs throughout the state, MacNaughton explains.

MacNaughton says the single biggest impact the company has on Alaska is through employment.

“By responsibly managing our business throughout the pandemic to retain and expand our employee base, those employees are able to support themselves, their families, their communities, and ultimately the regions,” MacNaughton says. “Whatever we do beyond this will always be secondary to being able to provide someone with a job and a competitive wage.”

The mining industry provides some of the highest wages in the state, according to a McKinley Research Group study. The average for all sectors of the economy is about $55,000, while the average annual wage in the mining industry is nearly $113,000.

Improving Quality of Life
Working within the United Nations’ Sustainable Development Goals framework for sustainable development and business activities, Northern Star focuses on improving the quality of life in local communities, MacNaughton says.

“As an example, Northern Star recognized mental health as a significant health issue impacting Alaskans and citizens across the globe. We set out to train 20 percent of our workforce in mental health first aid,” MacNaughton says.

“The internationally accredited training assists in improving our employees’ health and wellbeing by arming peers with strategies, education, and referral information to help identify and offer support to their coworkers, friends, and family who may be suffering from poor mental health.”

Mental health first aid trainings are also open to local community members at no cost.

Pogo mine is one of five primary mining operations in full production in the state. Miller points out that with all mining projects, it’s necessary to have a long view, as it usually takes between eighteen and twenty years and about $400 million to come to a point that a company can make a decision to take a significant project to production or not.

And those taking a long view likely see a bright future for the mining industry in Alaska, Miller says.

With the increase in demand for copper, zinc, graphite, and rare earth elements for green technology, Miller sees Alaska’s mining industry as being perfectly situated to continue to grow and support communities throughout the state.

“If you can have a project in Alaska that can be advanced environmentally and socially at the highest levels and meet the market demands of the world, then I think we’re in a really good position for the future,” Miller says.